Blog: Polo Ralph Lauren on a roll
Leonie Barrie | 30 May 2007
The cost of a series of acquisitions this year was the only cloud on the horizon for Polo Ralph Lauren which today reported its results for the fourth quarter and fiscal 2007. While other US retailers have suffered in recent years, the company has managed to come in ahead of expectations through its focus on luxury consumers, an ongoing strategy to elevate its products, being more selective about sales and distribution, and reining back control of the brand.
For the fourth quarter, profits rose 17.1% to $73.2m helped by strong wholesale sales after earlier acquisitions started to reap rewards. Last year the company bought back the Polo Jeans business in the US from Jones Apparel Group for US$355m, and in July 2005 it bought its global footwear licensee, Ralph Lauren Footwear Co, from Reebok International Ltd for $110m.
This year too the acquisitions have rolled in thick and fast, including the remaining 50% stakes in Polo.com and New Polo Japan, the company's master licensee in Japan; the acquisition of the Polo Ralph Lauren Leathergoods business; and Impact 21, its Japanese sub licensee for men's and women's apparel, accessories and jeans. However, Polo Ralph Lauren admitted the price for its buying spree has been $360m or 27 cents a share – and lowered fiscal 2008 guidance accordingly.
Roger Farah, president and chief operating officer, says Polo Ralph Lauren’s fast-growing presence in Europe is likely to form the template for exciting expansion in Japan. “Europe represents nearly $900m in sales and is our fastest-growing region,” he told analysts today. “Japan represents the second largest area of sales outside the US…and we see it as an important stepping stone to growing our business throughout Asia and the Pacific Rim.”
The company also says it intends to invest a further $240m over the forthcoming year to support growth initiatives, including a new Ralph Lauren Media distribution facility in North Carolina and an extra 24 retail stores. Global Brand Concepts and its first initiative, American Living, a new lifestyle brand for men, women, and children is also due to be rolled out at the beginning of 2008.
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