USA: Polo Ralph Lauren To Close 23 Stores Following Review
It also plans to open a high-end store in Boston plus new stores in locations such as Dallas and Beverly Hills.
"I believe this focused retail strategy will provide a solid foundation from which we can continue to grow the Polo Ralph Lauren brand even more profitably," said Ralph Lauren, chairman and CEO of Polo Ralph Lauren.
"Our clear position in the luxury market and our ability to create new brand names such as Lauren, RALPH and Polo Jeans Co for the department store channel has positioned Polo Ralph Lauren as the number one fashion company in the world," Mr Lauren added.
As a result of the operational review, the company will record an
after-tax charge ranging from $110m to $115m, or $1.13 to $1.18 per share, in its second quarter of fiscal 2001. The after-tax charge will include approximately $73m to $75m that relates to the retail focus including the write-down of the assets of a number of stores to their fair values, the closure of all 12 Polo Jeans Co retail stores and the closure of 11 under-performing Club Monaco stores.
Approximately $22m to $24m of the charge relates to write-downs associated with the acceleration in the reduction of aged inventory, and approximately $15m to $16m relates to operating efficiency initiatives including the consolidation of overseas sourcing operations as well as severance and other employee-related costs. The charge is expected to be cash flow neutral in fiscal 2001.
Commenting on the Club Monaco stores, Mr Lauren said: "We
purchased Club Monaco because its concept is glamour and style at a
price, and we believe we can build it into a profitable vertical
retail operation. As the brand becomes more fashion-forward we are
refining the store rollout plan. We are opening Club Monaco stores in
markets such as Los Angeles, New York and South Beach Miami and will
close locations that don't match these fashion merchandising
"Our outlook for the business and its growth remains strong, and
we are committed to executing these initiatives and continuing to
expand our position as the premier global luxury company," Mr. Lauren
Excluding these charges, the Company expects to report second
quarter fiscal 2001 earnings on November 8 in line with
expectations. Lance Isham, vice chairman of Polo Ralph Lauren,
commented: "During the second quarter we continued to execute on our
operating plan, and we expect to achieve our planned earnings per
share goal for the second quarter."
Polo Ralph Lauren president and COO Roger Farah said, "The results of the operational review that the entire management team has undertaken over the past several months are expected to enhance our ability to continue to grow Polo as a premier global luxury company with greater efficiencies. Looking forward, we would expect to see improved results in the second half of fiscal 2001 based on continued strong demand for our brand and by implementing our new efficiencies."
The company will continue to refine its retail strategy by
expanding the presence of its full-line luxury stores, both in North
America and abroad, and by building a profitable portfolio of Club
Monaco stores in key urban locations.
"Based on our luxury retail emphasis, we also believe that
discontinuing the free-standing Polo Jeans Co retail business is the
right strategy. Polo Jeans Co is a modern, youthful brand that
continues to be a strong and successful line that performs very well
in department stores. The current economics of the full price
free-standing store format did not produce the level of profitability
we expect in our retail group," Mr Farah said.
"We are committed to building and operating a strong, profitable
full-line retail operation and believe the steps we announced today
will enhance our ability to build this business into a strong
bottom-line contributor," Mr Farah concluded.
"Supply chain management is one of the most important areas
targeted for operational improvement," Mr Farah said. The company
recently hired Russ LoCurto, a 21-year retail supply chain veteran, to
head Polo's worldwide logistics efforts and develop efficiencies in
Polo's supply chain that will better support the Company's growing and
increasingly global retail operations.
"While we are below our planned second quarter inventory, there is
still significant opportunity to accelerate our inventory turnover.
With more demanding standards on our inventory turnover we can
decrease our working capital needs," Mr. Farah said.
During the past several months the company has identified key
areas of cost reduction across the entire company. Specifically, the
company has targeted opportunities in its product sourcing, corporate
procurement, logistics and distribution, and the elimination of
redundancies in information systems and back office support.
"As a senior management team we believe there is a great deal of
opportunity to improve our existing expense structure and this review
has identified the key areas where we are taking immediate action,"
Mr Farah added.
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