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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.

According to Black, “We would not be surprised to see Jones purchase another company or sign an agreement that would lead to the dissolution of the Polo Jeans licensing agreement. Also our channel checks have indicated that the Polo Jeans division may be pending a mass exodus, as many team members appear to be seeking employment elsewhere.”

Black wasn’t too upbeat about the new Jones New York label. “We are not convinced that the new Jones New York lifestyle brand will work to replace the loss of Lauren….It appears that the company is stretching to capture new revenue streams as it faces the deficit brought on by the loss of Lauren.”

Moreover, Black observed, “In our opinion, Jones has its hands full with its current businesses and it may have difficulty managing more divisions. We are not only seeing the company struggle with its licensed businesses, we have seen the company lose its grip on its core Jones businesses. Additionally we are seeing the Nine West brand appear in distribution channels, which may be subjecting the brand to degradation.”

Not everyone in the financial community was as negative on Jones.

Virginia Genereux of Merrill Lynch observed Wednesday that the new launch should be “incrementally positive” for Jones. In addition, she expects Jones to “further boost its income statement with financial engineering, [spending] $150 million on share repurchase in 2004, which generates another 10 cents in earnings per share growth.”

On a negative side for Polo, Genereux noted that Tuesday’s legal developments were “incrementally negative” for Polo since Jones is going to go after Lauren’s space in the department stores “pretty aggressively.”
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