NEW YORK — Polo Ralph Lauren Corp. is moving forward smoothly on its somewhat rushed plans to take over the Lauren by Ralph Lauren line from Jones Apparel Group at the end of the year, and at least one analyst expects more generous markdown concessions once the label is officially housed at Polo.

According to an updated research note by Credit Suisse First Boston analyst Dennis Rosenberg, “Polo plans to provide greater marketing and markdown support than was given by Jones.”

Rosenberg’s report followed a meeting with Roger Farah, Polo’s president and chief operating officer. Polo declined comment on Rosenberg’s note. As reported, he’d earlier enunciated a “no return” policy for Polo but noted in February that Polo was supporting its department store accounts with “as much markdown money as we can” in order to support stores battling a difficult retail climate.

As reported, Jones and Polo had been feuding about the timing of the expiration of the Lauren license, but the status of the line was rendered moot last month when Jones gave it up and sued Polo, seeking compensation for profits lost due to the surrender of the license. Polo is set to file its answer shortly, as well as it own set of counterclaims against its former and current licensing partner. Before doing so, it’s awaiting Jones’ response to its request that the suit be dismissed and the judge’s ruling after submission of the required paperwork.

Jones still holds the licensing rights to Polo Jeans, which were unaffected by the dispute.

While Jones busied itself with a replacement line under the Jones label, its move forced Polo to quickly ramp up the design and production of the Lauren line. Rosenberg noted that Polo appears to be meeting its first spring delivery target date to retailers, a move that, along with other planned improvements to the line for fall, would help ensure sales of between $400 million and $500 million for the year ending March 2005.

Rosenberg estimated a first-year operating profit margin in the midteens, which would result in the Lauren line adding 20 cents to Polo’s fiscal 2005 earnings per share. He wrote that “management’s margin goal is at least 20 percent in the second full year.” At that rate, the analyst estimated, Lauren’s EPS contribution would double to 40 cents, assuming $500 million in sales.Although considered “mature” at Jones, the Lauren label generated $548 million in sales during Jones’ last fiscal year. Jones is itself busy developing a Jones New York lifestyle brand to compensate for the loss of the Lauren label.

Rosenberg also wrote, “We came away with greater confidence that Polo will be successful in delivering a full spring line and in retaining most of Lauren’s current department store real estate.”

He added that Polo’s plans to grow the Lauren line included the adding a career collection, expanding activewear and other new classifications and entering international markets. Launching Lauren on a wholesale basis in large department stores in Europe and the Far East could begin as early as “calendar 2005.” Lauren is not scheduled for international distribution at the specialty store level to minimize the cannibalization of last year’s Blue Label launch.

“The designs taken back from Jones were modified and improved by designers from other Polo women’s brands, who were ‘on a mission’ to make sure that the Lauren product was right,” Rosenberg wrote of the spring assortment. “Samples for the September market are now being produced. Fabric procurement has been completed and production will be made the week of July 14.”

No major changes in the line were planned for spring, but the apparel firm is planning more fashion content and higher-quality fabrics in upcoming seasons, with neither benefit to the line resulting in an increase in retail prices.

To Read the Full Article

Tap into our Global Network

Of Industry Leaders and Designers

load comments
blog comments powered by Disqus