Polo Ralph Lauren Corporation

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Polo Ralph Lauren Corporation

founded: 1968

Contact Information:

headquarters: 650 madison ave.

new york, ny 10022 phone: (212)318-7000 fax: (212)888-5780 url: http://www.ralphlaurenfragrance.com

OVERVIEW

New York-based Polo Ralph Lauren is one of the world's most recognizable designer brands. The company has lines in several markets, including clothing for men, women, and children; fragrances; skin care products; and home furnishings. Clothing lines include everything from department store sportswear, Polo Sport, to a couture line offering clothes in the $3,000 price range. As of 1998, most clothing distributed by the company was designed and made by Polo's wholesale division, while the retail sector operated nearly 30 Polo Ralph Lauren and Polo Sport stores.

In addition to clothing, Polo Ralph Lauren also markets bedding and bath items, furniture, and tabletop and giftware items through its Home Collection. Many of these products are made by licensee companies such as Reed and Barton and WestPoint Stevens.

According to company sources, Ralph Lauren takes great pride in his company and in his products. He professes a simple style philosophy: "I believe in design that has integrity, design that lasts. Whatever it is, it must be part of the lifestyle and become more personal with time." For Lauren, every product distributed by the company has a personal meaning, blending romance, innovation, and tradition with inspiration. He borrows design elements from African safaris, the English aristocracy, Parisian cafe life, old Hollywood, the Western frontier, Russian revolutionaries, Santa Fe adobes, New England prep schools, and competitive sports. These diverse looks obviously resonated with consumers worldwide, who spent over $1 billion on the designer's goods in 1997.

COMPANY FINANCES

Sales have shown a steady upward climb, from $746.0 million in 1995 to $909.0 million in 1996, $1.04 billion in 1997, and $l.47 billion for the fiscal year ended March 1998. The trend continued into 1998, with the company reporting a 32–percent jump in 1999 fiscal year net income, or $22.7 million on revenues of $358.8 million.

Ralph Lauren took his company public on June 12, 1997. The company's stock opened at $26.00 per share on the New York Stock Exchange. Unlike other fashion-world stocks, it held its value at about $28.00 per share through the first half of 1998, trading for as low as $21.75 and as high as $33.00 per share between June 1997 and May 1998. As a majority shareholder, Ralph Lauren's personal stake in his company was over $400 million after Polo went public.

ANALYSTS' OPINIONS

In 1997, during the company's Initial Public Offering (IPO), the CEO of Amas Securities, Peggy Farley, was quoted in Pathfinder Business News as saying, "This is the most exciting thing coming down the road in quite a long time. There's no question this is a terrific company." Some financial industry experts panned the stock because other fashion companies' IPOs did not hold their value. For example, Donna Karan International, Guess?, and Designer Holdings were all considered disappointing because their stock prices fell well below their initial offering prices. However, the market favored Polo Ralph Lauren, probably due to the company's classic designs and diverse product range. The IPO was led by Goldman Sachs, which is a 28 percent owner. Ralph Lauren, Morgan Stanley, and Merrill Lynch underwrote the deal. As of late 1997, at least two securities firms considered the stock a good buy. On April 1, 1998, the company's board of directors announced that they would buy back at least $100 million of its Class A Common Stock at regular intervals for the next two years. The company planned to use repurchased shares "for stock option programs and . . . other corporate purposes."

HISTORY

Ralph Lauren, born Ralph Lifschitz in the Bronx area of New York, was the son of a Russian immigrant house painter and muralist. He informally changed the family name to Lauren, and encouraged his son to cultivate an upper-class style. After high school, when Ralph formally changed his name to Lauren, he became a salesman at Brooks Brothers, and then a sales representative for Boston tie maker Rivetz. He worked as a tie designer for Beau Brummel of New York in 1967. The company provided Lauren with his own style division, which he named Polo after the sport's refined image. In 1968 he started Polo Fashions to create menswear. In the early 1970s he teamed up with Peter Strom, and although his designs received several accolades, Polo Fashions had a difficult beginning. Lauren still did not fully understand the business world then, but he did have a talent for design and marketing.

FAST FACTS: About Polo Ralph Lauren Corporation

Ownership: Polo Ralph Lauren is a publicly owned company traded on the New York Stock Exchange.

Ticker symbol: RL

Officers: Ralph Lauren, Chmn. & CEO, 58; Michael J. Newman, VChmn. & COO

Employees: 5,800

Principal Subsidiary Companies: Polo Ralph Lauren's subsidiaries include: Ralph Lauren Enterprises; Polo Ralph Lauren; Ralph Lauren Womenswear Co.; and Polo Retail Corp.

Chief Competitors: Polo Ralph Lauren competes primarily against other apparel and fashion accessory makers. Its other competitors include companies marketing fragrances, home furnishings, and house-wares. Main competitors include: Anne Klein; Ann Taylor; Bill Blass; Calvin Klein; Donna Karan; Estee Lauder; Fieldcrest Cannon; Geoffrey Beene; Giorgio Armani; Guess?; Gucci; Jones Apparel; Lands' End; LauraAshley; Levi Strauss; Liz Clai-borne; L.L. Bean; LVMF; Nautica Enterprises; Oneida; Prada; Springs Industries; Tommy Hilfiger; Waterford; and Wedgwood.

In the 1970s Lauren began to be recognized by those in high-powered positions in the fashion industry. He won three Coty awards for costumes designed for the movie "The Great Gatsby," starring Robert Redford. In 1971 Lauren introduced his polo player on a horse logo and developed a women's line. Also that year the first licensed Polo store opened on Rodeo Drive in Beverly Hills, along with the first in-store boutique in New York's Bloomingdale's. He added a shoe collection in 1972, licensed his women's clothing line in 1973, and launched his licensed fragrance line in 1978. Licensing became popular in the 1970s because middle-class consumers wanted designer products at affordable prices. Designers liked licensing products because it allowed them to sell to a mass market and avoid dealing directly with manufacturing or contracting.

In 1980 Polo Fashions became Polo Ralph Lauren, and with the success of his clothing designs, he branched into home furnishings. Lauren introduced his Home Collection in 1983—an innovative idea for the fashion industry. Lauren prospered throughout the 1980s, but the 1990s brought different fashion trends. Lauren bought a ranch and designed and marketed cowboy clothes. In 1993 he introduced the Double RL line of western wear, but it was unsuccessful. The company pulled $100 million in merchandise off the shelves to avoid discontinuing it. Lauren retained the rights to the Double RL and Ralph Lauren logos, for a line of meats or other agricultural products.

In 1994 Lauren sold 28 percent of the company to a Goldman Sachs investment fund for $135 million. The company went up-market with its Purple Label, which included a line of $2,000 hand-tailored suits, and sought to reach a mass market by forming Polo Jeans Co. In 1996 Lauren introduced a line of paints and wall finishes.

PRODUCTS

Polo Ralph Lauren developed several products that appealed to diverse demographic groups. Its extensive line of clothing offered many different styles for men, women, and children. The Polo Collection was the most successful, with items that ranged from men's shirts and pants to women's active wear. They also produced clothing for infants and toddlers using the Polo name and a Ralph Lauren line for girls in sizes 4 to 6x. By 1999 the company also planned a Ralph Lauren girls' line in sizes 7 to 16 and a line of women's and girls' swimwear, plus a Polo Ralph Lauren boys' line in sizes 4 to 7 and 8 to 20. The company marketed several household items using its Home Collection name. These included licensed bath rugs, paint, picture frames, and wallpaper. The company also distributed accessories such as footwear, glasses, scarves, luggage, handbags, and jewelry.

One of the most popular lines Polo introduced was its extensive array of fragrances. These included Chaps for Men, Lauren for Women, and Safari, an individual scent for men and women. The most famous fragrances were the Polo and Polo Sport collections. Polo cologne was introduced in 1978 and was an immediate success. The fragrance was inspired by the Polo shirt, and was developed for a man who, according to Lauren, was self-assured, naturally athletic, and "just as comfortable in a tuxedo as in a Polo shirt." The fragrance sold globally, and ranked among the top five men's fragrances in the world. Packaged in a distinctive green flask with a brass top, Polo was "a rich, masculine scent with wood, leather, and tobacco essences." The fragrance continued to be a successful product for the company, especially favored by those who aspired to the Ralph Lauren image.

CORPORATE CITIZENSHIP

Ralph Lauren has been recognized for his many phil-anthropic contributions. In September 1996, Diana, Princess of Wales, presented him with the first humanitarian award from the Nina Hyde Center for Breast Cancer Research. While Lauren focused much of his time on organizations associated with breast cancer research, he also raised funds for AIDS research. He is known throughout the fashion industry as an individual who was involved not only in the production of quality products, but also as a volunteer and humanitarian.

CHRONOLOGY: Key Dates for Polo Ralph Lauren Corporation

1967:: Beau Brummel gives Ralph Lauren his own style division, which he calls Polo
1968:: Lauren creates Polo Fashions to create menswear
1974:: Lauren wins three Coty awards for costume design for The Great Gatsby
1978:: Launches his line of fragrances
1980:: Polo Fashions becomes Polo Ralph Lauren
1983:: Lauren branches into home furnishings
1993:: Begins designing Western Wear with the Double RL line
1994:: Lauren sells 28 percent of Polo to Goldman Sachs investment fund; forms Polo Jeans Co.
1996:: Lauren is presented with the first humanitarian award from the Nina Hyde Center for Breast Cancer Research

GLOBAL PRESENCE

By 1998 Polo Ralph Lauren operated more than 200 Polo shops and outlet stores worldwide. The company's

STAR-SPANGLED GRATITUDE

Hillary Clinton started a tour of past American treasures in September 1998 with a $10-million contribution by Polo Ralph Lauren. The contribution was made to help restore the flag that inspired Francis Scott Key to write the words to the national anthem. This contribution is the largest in the Smithsonian Institution's history. A personal contribution of an additional $3 million was also donated by Ralph Lauren to help with an advertising campaign to inform the public about the efforts to "save America's treasures." President Clinton joined his wife at the National Museum of American History, the starting point of her tour. Clinton thanked Lauren for "this incredible act of generosity and, I think, foresight."

clothing was sold in 1,500 department and specialty stores around the world. In the spring of 1998, the company expanded to the Middle East, opening stores in Kuwait, Dubai, Saudi Arabia, and Israel.

SOURCES OF INFORMATION

Bibliography

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