High in the Saddle: Polo’s Luxury Slant Helps Net Leap 52.5%

Polo Ralph Lauren’s first-quarter income skyrocketed 52.5 percent, boosted by its luxury slant.

Roger Farah, president and chief operating officer, said during a conference call with Wall Street analysts that Polo is in ongoing discussions with Jones Apparel Group regarding the Lauren by Ralph Lauren license. “We are continuing to work for what we hope will be the right solution for the customers and the brand,” he said.

As reported, those discussions also center on the Ralph by Ralph Lauren license and even the successful Polo Jeans license held by Jones, even though the jeans license is unaffected by the initial Lauren dispute. In total, the three licenses represent about $1 billion in annual revenue to Jones.

While not mentioning the licenses held by Jones, Farah told analysts that the company believes in the “direct ownership of those businesses whose expertise falls within the scope of our core competence….A continued focus on acquiring those licenses that make sense to our business will be an important part of our company’s future growth strategy.”

Dennis Rosenberg, analyst at Credit Suisse First Boston, in a research note update, wrote Wednesday, “We believe that discussions may be centered on buying back the Polo Jeans license as a part of a comprehensive resolution.”

Farah said during a telephone interview that the company was just starting to review its different department store doors, which it plans to reduce over the next few years. “Our decision will be based on can we make the proper assortment for the customer given the size of the door and store or will [the brand] just be represented by basics. Ralph and the company [believe] that if it’s just basics, it’s not going to be fair to the brand and the customer.”

One production change the company has spent the last two years perfecting will be introduced in all fall shipments. Using filaments, labels will contain microchips that can be scanned for certain information to determine a product’s authenticity.

“We’ll know exactly what style was ordered, what pieces and for what customer. We’ll be able to nail down where the problem is, and take the necessary [steps] to stop it,” Farah said.

The process and formation of the technology was initiated by Polo, and the goal was to cut down on the production of counterfeit or unauthorized goods. “After years of ‘ring around the rosy,’ we will give the wanding gun to key retailers so they can determine whether [a product] is counterfeit or not….This issue of counterfeiting will dry up once [the perpetrators] realize that there is technology to fix the problem.” The president even joked — tongue-in-cheek — that the company was willing to share its know-how for a small fee.
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