Polo/Ralph Lauren Corporation History
New York, New York 10022
Telephone: (212) 318-7000
Toll Free: 888-475-7674
Fax: (212) 888-5780
Incorporated: 1968 as Polo Fashions, Inc.
Sales: $2.44 billion (2003)
Stock Exchanges: New York
Ticker Symbol: RL
NAIC: 315 Apparel Manufacturing; 54149 Other Specialized Design Services
Polo has become a brand with unmatched recognition in the marketplace, offering the best of menswear, womenswear, childrenswear and home design. Polo's design excellence works in concert with its disciplined business approach, and these two traits together have allowed the Company to set the standard for the industry.
- Polo Fashions is created by tie salesman Ralph Lauren.
- The first ads appear in NYC newspapers.
- Polo cologne is introduced.
- An extensive, licensed home furnishings line debuts.
- The flagship store opens on Madison Avenue.
- Polo/Ralph Lauren goes public.
- The European headquarters moves from Paris to Geneva.
The Polo/Ralph Lauren Corporation (RL) has become one of the best-known fashion design and licensing houses in the world. Founded by American designer Ralph Lauren in the late 1960s, the company boomed in the 1980s as Lauren's designs came to be associated with a sophisticated and distinctly American attitude. The company's first products were wide ties, but it soon designed and manufactured an entire line of menswear before entering the more lucrative women's fashion market as a designer and licenser. By the 1980s, the Polo/Ralph Lauren name helped sell a wide array of products, including fragrances and accessories for men and women, clothing for young boys and infants, and a variety of housewares, shoes, furs, jewelry, leather goods, hats, and eyewear. Menswear accounted for 42 percent of 2003 sales of $2.44 billion. Womenswear was the next largest segment (25 percent), followed by fragrances, accessories, children's, and home. Brands include Polo, Lauren, Chaps, and Club Monaco. The company licenses nearly 300 manufacturers and 100 retail outlets around the world. RL also runs 240 of its own stores in the United States.
Origins in the 1960s
Ralph Lifshitz was born on October 14, 1939 in the Bronx to a middle class Jewish family. Somewhere along the way he had his surname legally changed to "Lauren." His father was an artist and housepainter; his mother was reportedly disappointed Ralph did not become a rabbi.
The Polo empire began in the late 1960s, when Lauren, then a clothing salesman, got sick of selling other people's neckties and decided to design and sell his own. Lauren had no experience in fashion design, but he had grown up in the New York fashion world, selling men's gloves, suits, and ties. In 1967, he went to his employer, Abe Rivetz, with a proposal to design a line of ties, but Rivetz told him, "The world is not ready for Ralph Lauren." Lauren decided that it was, and he convinced clothier Beau Brummel to manufacture his Polo line of neckwear. "I didn't know how to make a tie," Lauren confessed to Vogue in 1982. "I didn't know fabric, I didn't know measurements. What did I know? That I was a salesman. That I was honest. And that all I wanted was quality." Lauren's ties were wider and more colorful than other ties on the market and they soon found a niche, first in small menswear stores and later in the fashionable Bloomingdale's department store.
Within a year, Lauren decided to form his own company with help from his brother Jerry and $50,000 in backing from Norman Hilton, a Manhattan clothing manufacturer. The company, Polo Fashions, Inc. (which changed its name to Polo/Ralph Lauren Corporation in 1987), expanded the Polo menswear collection to include shirts, suits, and sportswear, as well as the trademark ties. The company designed, manufactured, and distributed the Polo collection, which met with the approval of both the department stores that featured the clothes and the fashion critics who praised their style. Fashion critic Bernadine Morris was quoted in Time as saying, "He's acquired a certain reputation for clothes that are, you know, with it. But not too with it. Not enough to shock the boys at the bank." In 1970, Lauren received the coveted Coty Award for menswear. In a rare move, Lauren then began designing clothes for women as well as for men. His first designs--men's dress shirts cut for women--met with great success in 1971, and soon sales topped $10 million.
The rapid growth of Polo Fashions, Inc. proved hard to manage for the young entrepreneur, who had succeeded in crafting a brand identity but not in managing his business. By 1972, according to Time, "Lauren suddenly discovered that his enterprise was almost bankrupt because of poor financial management and the costs of headlong expansion." "I almost blew my business," Lauren told Forbes. "I wasn't shipping on time and had problems delivering." "It was probably ... one of the darkest moments in my life," he remembered in New York. Scrambling to survive, Lauren invested $100,000 of his savings in the business and convinced Peter Strom to leave his job with Norman Hilton and become his partner. The arrangement gave Lauren 90 percent and Strom 10 percent ownership. Strom described their duties to the New York Times Magazine: "We divide the work this way: I do everything Ralph doesn't want to do; and I don't do anything he likes to do. He designs, he does advertising, public relations; I do the rest." The Lauren brothers and Strom soon made changes in the structure of the company that set the stage for more than two decades of unparalleled success.
During its first four years, Polo Fashions, Inc. had controlled each stage in the clothes making process, from design, to manufacture, to distribution. Their first step in reorganization was to concentrate on what they did best--design--and leave the rest to other companies. With this in mind, Polo Fashions, Inc. licensed the manufacture of Ralph Lauren brand womenswear to Stuart Kreisler, an experienced manufacturer who set out to build the reputation of the Lauren brand name. Under licensing agreements, the designer got a cut of wholesale revenues--usually between 5 and 8 percent for Polo, according to Forbes--and shared in advertising costs. Such agreements would be the basis for Polo's future business. Moreover, Strom insisted that those retailers who sold the company's clothes make a commitment to selling the entire line, which meant they had to carry the $350 Polo suit. "That eliminated two-thirds of our accounts," Strom told Vogue. "But those who stayed with us experienced our commitment to them, and it wasn't long before we felt their loyalty in return." With business once again secure, the company was able to turn its attention to crafting a brand image as distinctive as any in America.
1980s: The Decade of Polo
Beginning in the mid 1970s, Polo Fashions, Inc. entered a period of phenomenal growth that carried it through the late 1980s. From being a designer and licenser of limited lines of men's and women's clothing, the company expanded its products to include fragrances, eyewear, shoes, accessories, housewares, and a range of other products. Yet even as the number of products bearing the brand names "Polo" or "Ralph Lauren" expanded, the image of the company became more secure and more singular. Soon, people were speaking of the "Laurenification of America," crediting Ralph Lauren with creating a unique American aesthetic, and calling the 1980s the "decade of Ralph Lauren." The company's success in this period can be credited to the design skills of Ralph Lauren and to the astute image-making and marketing skills of Lauren and his principal partner, Peter Strom.
Fashion critics and journalists used words like integrity, elegance, tradition, sophistication, WASPy, mannered, pseudo-English, and sporty to describe Lauren's many designs. Yet no single word could encompass the many themes--from the famous English Polo Club designs to the distinctly American western designs--with which Lauren experimented. Some critics complained that Lauren was a relentless borrower, possessed of no unique vision. Lauren himself stated in New York that he was interested in "style but not flamboyance, but sophistication, class, and an aristocratic demeanor that you can see in people like Cary Grant and Fred Astaire." And, as Lauren pointed out, "The things I do are not about novelty. They're things I love and can't get away from. There are some things in life that, no matter what the times are, keep getting better and better. That's really my philosophy."
Polo excelled at getting Lauren's distinctive design image across to consumers. From its very first advertisements in New York City newspapers in 1974, the company attempted to portray its products as part of a complete lifestyle. Polo pioneered the multi-page lifestyle advertisement in major magazines. These ads presented a world lifted out of time, where wealthy, attractive people relaxed in Polo products during a weekend at their country estate or on safari in Africa. Vogue described the ads as a kind of "home movie," with a cast of "faintly sorrowful but wildly attractive people. The women are always between childhood and thirty; the men are sometimes old." Polo lavished huge amounts of money on these ads, as much as $15 and $20 million a year, though its licensees shared some of the cost by returning 2 to 3 percent of sales into the advertising budget. An ad director for a major fashion magazine told Time: Polo "has some of the best advertising in the business because it sets a mood, it evokes a lifestyle."
Lauren's intuitive design sense and the company's ability to create an idealized image for its products provided the base for the company to expand the variety of products it marketed and attain greater control over retailing. From its first product lines--Polo by Ralph Lauren menswear and Ralph Lauren womenswear--the company introduced a variety of products: Polo by Ralph Lauren cologne and boys' clothing in 1978; a girlswear line in 1981; luggage and eyeglasses in 1982; home furnishings in 1983. Later brand extensions included shoes, furs, and underwear. The company introduced its collection of apparel for newborns, infants, and toddlers in 1994. These new product lines were accompanied by continual updating of the older brand names.
Although Polo retained control over the design and advertising of its products, the success or failure of Polo product expansion often depended upon its licensees, as Polo's experience with fragrances and its home collection indicated. Polo's fragrances became a major income producer only when it found a licensee who was willing to help develop and promote the products. Although Polo had marketed its fragrances--Polo by Ralph Lauren for men and Lauren for women--since 1978, they were not major sellers until the mid-1980s, when the company licensed fragrance production to Cosmair, Inc. In 1990, Cosmair introduced Polo Crest for men and Safari for women, made to accompany a new line of clothing also bearing the Safari name. Cosmetic Insiders' Report called Safari the "Fragrance of the Year" after it recorded sales as high as $11,000 a day at Bloomingdale's flagship stores. Cosmair hoped to sell between $25 and $30 million wholesale by the end of the fragrance's first year. Two years later Polo and Cosmair launched Safari for Men, which they promoted in an uncharacteristic television commercial in which Ralph Lauren rode a horse bareback on a beach. According to Women's Wear Daily, Cosmair hoped to sell $28 million in wholesale at the end of six months, and to top $50 million by the end of two years.
Not all licensing arrangements worked so well. In 1983, Polo began to promote the introduction of its "Home Collection," a line of products that Lauren had designed for the home. House & Garden called the collection, which numbered more than 2,500 items and included everything from sheets to furniture to flatware, "the most complete of its kind conceived by a fashion designer." But the collection soon ran into serious trouble as the licensee, the J.P. Stevens Company, experienced difficulties getting the products to retail outlets on time. J.P. Stevens also had trouble maintaining quality control, having themselves licensed elements of the line to other companies. In addition, Stevens demanded that stores that wanted to show the collection construct $250,000 free-standing, wood-paneled boutiques to display the items--and stores balked at the price tag. Polo/Ralph Lauren Vice-Chairman Peter Strom told Time that the introduction was "A disaster! Disaster!" It took several years for Polo to get the collection back on track.
Over the years, Polo used a number of techniques to exert control over the way its merchandise was distributed and sold. Early on, the company insisted that retailers offer the entire product line instead of simply selecting items it wanted to carry, arguing that the lines had to stand as a coherent whole. Beginning in 1971, the company began to offer franchises as well, and it has franchised more than 100 Polo/Ralph Lauren stores worldwide since that time. Instead of charging a franchise fee, the company made money as the wholesaler for the clothing. These franchises allowed an entire store to concentrate on the Polo image. In 1982, Polo opened the first of its 50 outlet stores in Lawrence, Kansas. The outlet stores allowed the company to control the distribution of irregulars and items that had not sold by the end of each season, thereby preventing the company's products from appearing in discount stores. These outlet stores were placed at a significant distance from the full-price retailers to ensure that they did not steal business. Such expansion occurred not only in America but around the world, as Polo opened shops in London, Paris, and Tokyo.
The flagship of the Polo/Ralph Lauren retail enterprise was the refurbished Rhinelander mansion on Madison Avenue in New York City. Opened in 1986, the 20,000-square-foot mansion featured mahogany woodwork, hand-carved balustrades lining marble staircases, and sumptuous carpeting. "While men who look like lawyers search for your size shirt and ladies who belong at deb parties suggest complementary bags and shoes, you experience the ultimate in lifestyle advertising," wrote Lenore Skenazy in Advertising Age. Naomi Leff, who designed the interior of the Polo palace, called it "a marker in retailing history. It tells manufacturers that if they're willing to put out, they'll be able to make their own statement, which is not being made in the department stores."
Establishing brand-focused retail outlets made perfect sense for Polo/Ralph Lauren, for it allowed the company to increase profits by eliminating the middleman as well as to control the environment in which the products appeared. In fact, other designers have since followed Polo/Ralph Lauren's lead, including Calvin Klein, Liz Claiborne, Adrienne Vittadini, and Anne Klein. But the move caused tension between the designer and his traditional retailers, the large department stores. A Forbes feature on Lauren's strategy claimed that "a lot of people in business think it is in bad taste to compete with your own customers. Lauren clearly does not agree. And such is his pull at the cash register that he may get away with this piece of business heresy."
Public in 1997
The Polo/Ralph Lauren Corporation rode its expertly crafted brand image and astute retailing strategies to remarkable heights in the 1980s, as sustained economic growth and America's fascination with Lauren's image fueled an unparalleled expansion in products bearing the Ralph Lauren name. But retail expansion slowed dramatically with the economic downturn in the early 1990s, and some stores that once thrived on the sales of Ralph Lauren's high-priced products complained that the company was unable to adjust to changes in the market. Robert Parola, writing in the Daily News Record in 1990, noted that many clothing manufacturers had lifted their designs from Ralph Lauren and begun selling them for less. Polo/Ralph Lauren was hardly a company to be counted out in the 1990s, however. Successful fragrance introductions and the development of the popular Polo Sport active-sportswear and Double RL jeanswear lines promised to keep money rolling into the company coffers. The 1994 sale of 28 percent of the company to a Goldman Sachs & Co. investment fund for $135 million prompted speculation about the future of the company. Wall Street Journal reporter Teri Agins remarked that "the company is at a crossroads as it embarks on a strategy to improve its retail operations and lure a younger generation" to its products. In the short term, industry observers expected the company to use the cash influx to expand its retail stores. But observers also wondered whether this sale, the first in the company's history, indicated that the company would eventually go public or that Ralph Lauren was beginning to look toward life after designing.
The company did, in fact, go public on the New York Stock Exchange, on June 13, 1997. Founder and Chairman Ralph Lauren sold nearly 18 million of his own shares for $465.4 million. He retained 90 percent of voting rights, however, through his ownership of all outstanding class B stock.
Although the shares were trading at a premium, some analysts felt the stock had good growth potential due to relatively unexploited world markets and an underdeveloped women's line; two years earlier, Polo had regained the rights to it from its licensee, Biderman USA.
Polo had then brought out a moderately priced women's collection in collaboration with licensee Jones Apparel Group in the fall of 1996. (The more expensive Ralph line was then renamed "RL.") Within a couple of years, however, Polo would cancel the contract due to low sales volume, and Jones would take its case to court.
Polo rolled out a plethora of other brand extensions in the late 1990s, including shoes from Reebok and Rockport and a line of Polo-brand jeans. There was also more shifting of licensees: Corneliani S.p.A. of Italy won the right to produce RL's Blue Label clothing line for men. In 2001, WestPoint Stevens, which already made RL sheets and towels, took over the bedding license from Pillowtex Corp. The total number of licensees was soon approaching 300.
RL ended 1998 with announcements of 250 job cuts and nine store closings. At the same time, it was opening a flagship store in Chicago. An RL-branded restaurant opened next door a few months later. The company had about 200 outlets, half of them operated by licensees.
New Frontiers for the New Millennium
In March 1999, RL paid $80 million (C $80 million) for Club Monaco Inc., a chain of trendy clothing stores based in Toronto. It had 56 stores in Canada and 13 in the United States. Club Monaco attracted the younger, hipper clientele that Ralph Lauren had been unable to lure away from the likes of Tommy Hilfiger.
In 2000 the company formed a multimedia marketing joint venture with NBC and affiliates NBCi, CNBC, and ValueVision (operator of the Home Shopping Network). RL's first television advertising debuted soon after.
RL bought European licensee Poloco SA in 2000 for $230 million; Italian licensee PRL Fashions of Europe and a Belgian store were acquired in 2001. RL was able to quadruple European sales between 1999 and 2002, noted Crain's New York Business, but expansion was expensive. In Europe, clothing was typically sold in specialty shops, not giant department stores, such as the Big Three in the United States that made up more than a half of RL's wholesale revenues. RL moved its European operations from Paris to Geneva in 2003.
In February 2003, RL paid ¥5.6 billion ($47.6 million) for a 50 percent interest in the master license of the Polo Ralph Lauren men's, women's, and jeans business in Japan. Stores also were acquired from licensees in Germany and Argentina.
One employee at a San Francisco store sued RL for allegedly forcing its employees to buy its own pricey clothes to wear at work, and to update their wardrobes every season. Polo denied having such a uniform requirement, reported the San Francisco Chronicle. Ironically, a general return to dressier work clothes, a result of a tighter job market, was one good sign for the company entering 2004. RL assumed responsibility for its Lauren line for women from its former licensee, Jones Apparel Group.
Principal Subsidiaries: Acqui Polo, C.V. (Netherlands); Fashions Outlet of America, Inc.; PRL USA Holdings, Inc.; PRL International, Inc.; Ralph Lauren Media, LLC (50%).
Principal Operating Units: Polo Brands; Collection Brands.
Principal Competitors: Banana Republic; Liz Claiborne Inc.; Nautica Enterprises Inc.; Tommy Hilfiger Corporation.
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Source: International Directory of Company Histories, Vol.62. St. James Press, 2004.comments powered by Disqus