ANALYSIS: Asia holds the key to Ralph Lauren future
Polo isn't missing a trick on international soil, making "major strides" in Asia
A better-than-expected set of first quarter results will have pleased the powers that be at Polo Ralph Lauren, but it’s what happens next which holds the most interest for the US company.
Expansion plans are opening up on several fronts, but with a common theme: the international development of the brand and its spread into new territories and among new consumers.
The first of three main prongs is e-commerce: the UK launch is slated for early October, but this is only the first step in a broader roll-out across Europe, taking in several more countries over the next few years.
And staying on Europe, company president and COO Roger Farah is happy with progress, despite concerns over the fragility of the region’s recovery, and remains bullish about the future.
“We believe there is still considerable growth opportunity for us in Europe as we introduce new brands and merchandise categories into the market,” he told analysts during a conference call.
Eventually, the company has signalled, its expanding e-commerce platform will take in Asia – the third and most important strand of Polo Ralph Lauren’s current and future strategy.
The story here goes back seven months, to when the company assumed control of its operations in eight Asian countries, including China, Hong Kong and Taiwan, moving on to build a distribution hub in Hong Kong since then.
Now it is to assume direct control over distribution in the key market of South Korea, beginning from 1 January next year.
“Assuming control of South Korea is another important milestone in our broader Asia growth strategy,” said Farah.
“Once that transition is made, we will fully control our distribution throughout Asia, arguably the fastest-growing consumer market in the world for luxury goods.”
Arguably the fastest-growing? That’s putting it mildly. Polo Ralph Lauren’s brand sales across Asia currently amount to some US$850m – hardly chicken feed – but the company’s long-term goal is for the region to account for one-third of its global sales.
South Korea is already a vital part of this growth. It brings in $230m in revenue, thanks to a network of 175 shop-in-shops and five free-standing outlets – and is currently the company’s third largest market by volume.
Nonetheless, Polo Ralph Lauren’s targets for Asia remain extremely ambitious, and imply a great deal of growth from current levels.
Not that Farah has any doubts. “We’ve been working on this goal progressively over the last several years,” he told analysts.
“We’ve made major strides in enhancing the organisational capabilities of our operations.
“In the context of challenging department store trends, we are gaining market share and we’re meaningfully improving our profitability.”
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