Polo Ralph Lauren Company Essay Example

the company's Ralph Lauren-branded items. The company relies solely on department stores for its wholesale segment in North America, while in Europe and Japan, the bulk of its wholesale customers consist of specialty shops and shop-within-shops located within department stores. The wholesale facet constitutes the most significant portion of the company, rendering it highly dependent on how well department stores perform.

In the fiscal year of 2010, this sector accounted for approximately half of all earnings, with Macy's alone contributing to 10% of the total revenue (equating to 18% of the wholesale segment). Polo Ralph Lauren's retail division comprises its own direct selling of products. This includes company-owned stores and online shopping sites. As fiscal 2010 came to an end, the corporation's retail division operated 179 full-price stores, 171 outlets offering discounted items, 281 concession-based shop-in-shop systems and two e-commerce platforms; RalphLauren.om and Rugby.com.² The retail segment exclusively sells items under three brand names: Ralph Lauren, Club Monaco, and Rugby. These brands cater to both men and women by selling clothing and accessories at premium prices. The retail stores perform a key role in the corporation as they showcase its high-end products whilst maintaining "premium" brand image across all their offerings. In fiscal year 2010, this sector represented about 47% of overall revenue. The smallest among all three segments is licensing - it made up just 3% of total income for Polo Ralph Lauren in the fiscal year of 2010.⁴ This segment generates profit through granting permissions to manufacturers for using various Polo Ralph Lauren trademarks.
Furthermore, it allows its global licensing partners to distribute specific items and oversee retail outlets in designated areas. Luxottica Group, S.p.A

(responsible for 12% of total licensing revenue), The Warnaco Group Incorporated (contributing 9%), and Peerless Incorporated (making up 9%) are the key licensing collaborators of the company.

Prior to 2010, Polo Ralph Lauren had exclusively licensed its business in countries like China and India within the Asia-Pacific region (excluding Japan) to Dickson Concepts International Limited and its affiliates (Dickson). However, in December 2009, Polo Ralph Lauren bought Dickson and switched its Asian business to an entirely owned operation from a licensed operation. Polo Ralph Lauren, which operates in the highly competitive and accessible fashion apparel industry with minimal entry barriers, has strategically positioned itself for sector competition.

The industry brims with numerous established competitors offering unlimited choices to customers, often without significant switching costs. This high competition environment places continual pressure on Polo Ralph Laurent to maintain its market presence and profitability. Key competitors including Liz Claiborne, Philips-Van Heusen, and Jones Apparel Group pose direct threats, largely due to the similarity in their revenue generation strategies to Polo Ralph Laurent.

All are engaged in the distribution of their products via wholesale, retail, and licensing channels, which are split into various segments based on these three functions. They each boast a large, robust portfolio of brands intended for a diverse customer base. The biggest asset and unique distinction for these companies is their brand portfolio. Liz Claiborne (LIZ), established in 1967 simultaneously with Polo Ralph Lauren, is also headquartered in New York. Their brand collection includes Juicy Couture, Kate Spade, Lucky Brand, Claiborne, Liz Claiborne, DKNY active, DKNY Jeans, and DKNY Men1.

Similar to Polo Ralph Lauren, Liz Claiborne also retails "lifestyle products" such as clothing and accessories for

women, men, and children. Unlike Polo Ralph Lauren, however, Liz Claiborne does not offer home furnishings and instead concentrates on its clothing range. This includes modern attire, denim and casual sportswear, professional clothing, career sportswear, underwear, and athletic wear. Out of all four companies mentioned, Liz Claiborne has the smallest market capitalization, valued at slightly above $0.7 billion. Philips-Van Heusen (PVH), another major rival of Polo Ralph Lauren, has a market capitalization of $4.6 billion.

Operating in close proximity to Polo Ralph Lauren, the company shares a similar business approach. Its stable of recognized brands includes Calvin Klein collections, Van Heusen, and IZOD, but also boasts an expansive collection of licensed brands like Donald J. Trump Signature Collection, Kenneth Cole New York, Michael Kors, DKNY, Tommy Hilfiger, Nautica, and Timberland.1 Unlike the other three companies, this company heavily depends on its licensed brands for revenue. Jones Apparel Group (JNY), like this company, is also involved in the design, marketing, and distribution of clothing, footwear and accessories.

In contrast to the other three companies, Jones Apparel Group exclusively operates in North America, resulting in a heightened focus on this segment of market share. The group boasts an array of eminent brands including Jones New York, Anne Klein, and Easy Spirit, alongside renowned footwear brands such as Nine West, Bandolino, and Enzo Angiolini. Additionally, the corporation ventures into jewelry sales under the esteemed designer name Givenchy, a license obtained from Givenchy Corporation. They also retail footwear under the Dockers name which is a license from Levi Strauss ; Co.

Jones Apparel Group also authorizes the use of its name by producers and sellers of apparel and accessories. In 2010, the

firm made several purchases, including the acquisition of Moda Nicola International (MNI) in February, a company that owns the renowned Robert Rodriquez Collection, recognized for its women's contemporary evening and sportswear lines. Furthermore, Jones Apparel Group purchased a 55% stake in Stuart Weitzman Holdings, another company focused on apparel and footwear under the design brand of Stuart Weitzman.

Presently, Polo Ralph Lauren is maintaining a competitive edge over its rivals by concentrating on three critical growth policies: Extensions and diversification of its brand portfolio, transitioning from wholesale to retail operations, and augmenting their global footprint. 2 In recent times, the corporation has been regaining original licenses for several of its labels. This approach would enable them to regain control over their formerly licensed labels and independently distribute these products. This not only leads to potential expansion in revenues, but also offers the company enhanced regulation over its brand identities and product display methods.

Moreover, this offers them enhanced command over the selling cost of their products, potentially boosting profit margins in the long term. The previously noted procurement of their Asian license associate, Dickson, is a strategic move to shift the revenue emphasis of the company and broaden its global footprint. Polo Ralph Lauren approved a $250 million stock buyback in August 2010, hinting at the possibility that the company might deem its stock to be undervalued. However, since then, the stock price has surged nearly 50% from $75 per share at August 2010's conclusion to the existing $112 per share.

The superior performance of the whole retail sector and holiday period, coupled with a beyond expected second quarter earnings result released in October, accounts for most of

this. Nevertheless, in my opinion, the market has over-reacted to the company's short-term outlook, propelling the share price to an over-valued level. However, I predict that Polo Ralph Lauren will witness substantial growth and superior returns in the long haul. Hence, I suggest purchasing this stock if its price reverts to approximately $90 per share.