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Anticipating the worst case scenario in which Jones lost the Lauren license business, shares of Jones on Tuesday fell $2.57, or 8 percent, to close at $29.50 on the Big Board. At least 7.2 million shares traded hands on Tuesday, compared with an average daily volume of just 942,363 shares traded.
Peter Boneparth, Jones’ chief executive officer, said in a statement, "We disagree strongly with Polo’s belief that the two licenses are linked in this way. While we believe that a new long-term agreement arrived at by mutual consensus would be to the benefit of both our companies, given how well the Lauren line has performed under our stewardship, we are prepared to take all necessary steps to enforce our rights under the Lauren license."
Nancy Murray, senior vice president for corporate affairs at Polo, said, "We believe Polo Ralph Lauren has the right under its [Ralph and Lauren] contracts with Jones Apparel Group to terminate its existing license agreements based on Jones’ failure to meet certain contract minimums. Notwithstanding that right, we are in negotiations with Jones regarding the possible continuation of our business relationship.
"We have had a good long-standing relationship with Jones. [However], we believe our rights are very clear and we are comfortable in our legal position."
While Ralph is a business that was still in development, the Lauren line has been selling well at retail.
"The Lauren line is one of the best performing in sportswear and has been since the day they launched it. They’ve interpreted well-priced clothes for the better zone of business in the Ralph Lauren lifestyle," observed Frank Doroff, Bloomingdale’s executive vice president of ready-to-wear.
Emanuel Weintraub, apparel consultant, observed, "These are two very powerful companies who fundamentally need each other. Jones has put a huge amount of money into the Lauren line, and done an awful lot to bring an enormous value and [dollar] amount to the bottom line. I hope they will work this out."