Clash of the Titans: Turf War Brewing As Polo Battles Jones

With the battle between Polo and Jones Apparel heating, there’s speculation about the fate of the Lauren by Ralph Lauren shops in department stores.

Although Jones ceded the Lauren license upon filing its lawsuit, the next order of business could involve more litigation, this time with the Polo Jeans license.

Boneparth said in a conference call with analysts on Tuesday that the Polo Jeans business is not affected by the dispute and he is committed to it. He added that not having the Lauren license frees the company to pursue opportunities it otherwise could not. Boneparth said a key difference between the Lauren license restrictions and those in the Polo Jeans license was a matter of specified names in the former and “classification” in the latter.

According to a Securities and Exchange Commission filing in May 1998 by Sun Apparel — the firm which held the Polo Jeans license before it was bought by Jones — the Polo Jeans license has provisions that prevent Jones from “selling, advertising or promoting the sale of any items which are comparable and/or competitive with the Polo Jeans products and which bear the name of any fashion apparel designer…subject to certain limited exceptions.”

Dennis Rosenberg, an analyst at Credit Suisse First Boston, noted in a research report Wednesday that the “noncompete provisions of the [Polo Jeans] license may limit its ability to acquire or license other designer brands.”

According to Rosenberg’s report, Jones produces jeans, T-shirts, khakis, shorts, blouses and skirts under the Polo Jeans label. “We therefore believe there is the potential for another dispute should Jones produce any of those classifications under a competing designer brand.”

While there could be some leeway to those restrictions, that’s usually only if the executives at Polo grant their consent to a potentially competing line.

Sources close to Polo said that Jones’ purchase of the Gloria Vanderbilt business, while a designer brand, was completed prior to the current Lauren dispute. Also, Vanderbilt’s business doesn’t directly compete with Polo Jeans. One solution would have been for Jones to sell Polo Jeans back to Polo.

Jennifer Black, analyst at Wells Fargo, wrote in her note Wednesday that the Polo Jeans license “may also be in jeopardy” and that the potential for Jones losing the business is “mounting.” She also raised some concerns about the current Jones management team’s ability to manage its business. She lowered her rating on Jones from “hold” to “sell.”
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