Polo Ralph Lauren corporate profile - September 2003
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Polo Ralph Lauren corporate profile September 2003
All content copyright © 2003 Aroq Limited
Polo Ralph Lauren
corporate profile
Author: Stacy Baker
Published September 2003
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Polo Ralph Lauren: Corporate profileAll content copyright © 2003 Aroq Limited
Table of Contents
Table of Contents ................................................................................................................................................................... i
Overview................................................................................................................................................................................. 1
Brands .................................................................................................................................................................................... 6
Owned retail strategy ............................................................................................................................................................ 9
Europe ................................................................................................................................................................................... 10
Asia........................................................................................................................................................................................ 11
Sources ................................................................................................................................................................................ 12
Polo Ralph Lauren: Corporate profile iAll content copyright © 2003 Aroq Limited Overview
Overview
The 2002 holiday season was called the “worst in 30 years” by Nancy Murray,
senior VP of corporate affairs for Polo Ralph Lauren, but that didn’t stop the
company’s impressive performance for the period and year to date.
She reported in the company’s 3Q03 conference call that gross margins were
up 270 basis points while expenses dropped by 220 basis points. “The result
was an operating margin improvement of 480 basis points for the third
quarter,” she says, emphasising this was done in an "extremely challenging
economic environment.”
She also reported wholesale revenues in 3Q03 were up 17.4 per cent over
previous year, driven by double-digit sales in Europe while retail sales grew
11.6 per cent. Retail operating profits had a 119 per cent improvement over
the previous year; and retail margins for the quarter were 9.7 per cent
compared to 5 per cent in same quarter prior year.
What’s the secret (especially in this spending climate)? Farah attributes results
to being “driven by excellence in product design and marketing and we have
continued to invest even in this current environment.”
And the company doesn’t think its growth is a fluke. Murray predicts fiscal
2004 to be equally impressive. “We would expect our gross margin to increase
as we continue to grow our retail business and the mix of our business
changes to one more of a retail model. Our expenses as a percentage of sales
will increase due to the higher penetration of our retail business and, for the
first half of the year, we will be running parallel operations in Europe as we
transition.”
Her confidence is founded in the company’s initiatives which include supply
chain and logistics improvements which have increased cash flow, decreased
inventory levels by 22 per cent, reduced air freight costs, driven down
processing costs, reduced the number of satellite distribution centres and
improved flexibility.
Murray reported record 4Q03 earnings, an increase of 33 per cent over the
previous year, with revenues also increasing, by 9.4 per cent, thanks to
European sales, licensing royalties and growth in specialty retail.
Polo Ralph Lauren: Corporate profile 1All content copyright © 2003 Aroq Limited Brands
Brands
In terms of current lines doing well, the company’s Black Label is growing at
double digits (20 to 30 per cent) – a sign that men’s more formal attire is back
in business – and the newly launched women’s Blue Label is beating
projections domestically and abroad. This is key, say analysts, to giving the
brand a foothold with younger consumers, as well as those inspired by luxury.
The men’s wear line saw progress in suits, neckwear and accessories through
2003, the company reported, driven by Purple Label. Farah told investors he’s
seen a clear shift in men’s purchases from casual sportswear to dress attire, a
good sign for its own retail stores but not department stores, which he says are
dominated by sportswear-inspired SKUs.
He also reported that Lauren, Ralph Lauren was doing very well and although
the company plans on growing the line, they will continue their non-
promotional stance and positioning it in better department stores. One area of
expansion could be Asia or Europe.
To improve profitability and protect brand cachet the company has scrutinised
and evaluated it wholesale business, according to a recent conference call,
with the intent of identifying less productive operations and scaling back those
accounts.
“We’ve gone through very detailed analysis of really what’s the amount of
business we have to do in a store to give our product line the proper
assortment,” Farah said in the call. The long-term goal will be to go beyond
reducing basics in each store to a complete reduction in number of doors.
In spring of 2002, Polo began its “no return” policy which caused a dramatic
drop in earnings in early 2003 (Apparel, 2003). Specifically, it saw a loss in
men’s wholesale shipments. The impact is expected to continue through the
year. Polo didn’t report whether it was taking a strict across-the-board stance
or whether it would work with key customers in order to continue relationships.
Karl Bjornson, a senior manager of the merchandising division, group
operations for KSA, told Apparel that “as long as manufacturers recognise that
the retailers have to have some relief and they handle it up front, ‘no returns’
policies are going to be more the way of the future, and I think that retailers
recognise that.”
Polo Ralph Lauren: Corporate profile 6All content copyright © 2003 Aroq Limited Sources
Sources
Apparel, “Polo’s No Return Policy” 1.1.03
Crain’s New York Business, “Polo Goes Solo with Lauren Line…” 6.16.03
Daily News Record, “Polo Profits Plummet in First Quarter…” 8.12.02
Fair Disclosure, Polo Ralph Lauren Conference Call – 3Q03, 2.06.03
Fair Disclosure, Polo Ralph Lauren Conference Call – 5.21.03
Fair Disclosure, Polo Ralph Lauren Conference Call – final, 6.23.03
Hoovers, “DJO Polo Ralph Lauren ‘On Track’ For Spring….” 6.25.03
Morningstar, analyst report, Corey McElveen, 11.06.00
Morningstar, analyst report, Corey McElveen, 12.31.01
Morningstar, analyst report, Corey McElveen, 2.08.01
Morningstar, analyst report, Roz Bryant, 7.11.02
Polo Ralph Lauren, Annual Report, 2002
Polo Ralph Lauren, Annual Report, 2003
Polo Ralph Lauren, Investor Relations
PR Newswire, “Jones Apparel Group Files $550 Million Breach of Contract
Suit Again…” 6.03.03
Time Magazine, 9/2/02, “Ralph Lauren: A Bronx Cowboy in Europe?”
WWD, “High in the Saddle: Polo’s Luxury Slant Helps Net Leap 52.5 per cent”
5.22.03
Polo Ralph Lauren: Corporate profile 12You can also read
