Polo’s New Focus: Retail Division Grabs Majority of Business

Polo Ralph Lauren squashed speculation that its Club Monaco division was for sale, while reporting a drop in net income and revenues for the quarter.

According to Roger Farah Club Monaco is not on the block

According to Roger Farah, Club Monaco is not on the block.

Photo By WWD Staff

NEW YORK — Ralph Lauren, specialty retailer.

Specialty retail has become the major part of Polo Ralph Lauren Corp.’s business, for the first time generating more than half of the company’s revenues in the first quarter ended June 28. Also for the first time in the company’s history, the U.S. Ralph Lauren stores hit a high of 17 percent for same-store sales gains.

Further indicating Polo’s focus on specialty retailing, executives insisted Wednesday that the group has no intentions of selling Club Monaco. Instead, it’s preparing it for a growth spurt.

Roger Farah, Polo Ralph Lauren’s president and chief operating officer, stated plainly in an interview Wednesday, “We are not selling Club Monaco.”

Polo operates 62 Club Monaco stores and plans to open five or six in fiscal 2005, although none are planned for the current year.

Farah’s comment followed a conference call discussing first-quarter results that met Wall Street’s expectations even though net income fell by 21.7 percent because of expenses related to improvements at Polo’s overseas operations and a drop in wholesale revenues of more than $25 million.

Investors were pleased with the results and Polo’s maintenance of earnings guidance for the future, and they sent shares up $2.46, or 9.8 percent, to close Wednesday at $27.52 on volume of 2.5 million shares, more than six times their average on the New York Stock Exchange. At one point, the stock rose as high as $27.73, within $1 of its 52-week high of $28.71, which was reached on July 16.

Virginia Genereux of Merrill Lynch wrote in a research note that the stock “has reacted more positively, we think, due to larger investors’ sense of relief that the preliminary fiscal 2005 outlook for Lauren was okay.”

Farah told Wall Street the company expects its upcoming Lauren by Ralph Lauren collection to do $400 million during its first full year of operation ending in March 2005. The line is expected to make its way into 850 doors, a slight retreat from the estimated 1,000 doors occupied under Jones’ reign with the Lauren license, and about 450 special-size doors. The influence of designs from the company’s Black Label and Collection will enable Polo to inject more fashion into the brand, including more career offerings, while at the same time keeping the same fit and price points as before, said Farah.
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