Ralph Lauren: An Icon in Consumer Space

Ralph Lauren (RL) has carved out a niche for itself as a consumer icon in the cutthroat world of fashion. The 44-year-old company, named after the man who founded and runs it, has a leading presence in the upscale market for apparel, home products, accessories such as handbags, and fragrances.

Unlike some apparel companies, Ralph Lauren doesn’t manufacture its own goods but instead excels in design, marketing, and distribution. The company has almost 20 brands, among them Polo by Ralph Lauren, RLX, Chaps, and Club Monaco.

For years, consumers as varied as prep-schoolers, business moguls and Hollywood stars considered Ralph Lauren apparel a must-have brand. The company’s goods are sold at almost 10,000 retailers worldwide.

Revenue outside North America has increased at an average annual rate of 16 percent over the last five years, according to Morningstar. And the company has plenty of room for further growth overseas.

Domestically, a major strength of the company is that its merchandise is sold everywhere from the upscale Neiman Marcus down to the bargain bins at discounter TJ Maxx (TJX).

In the quarter ended Oct. 1, Ralph Lauren’s profit totaled $233.5 million, up 14 percent from $205.2 million a year earlier. Revenue jumped 24 percent to $1.9 billion.

Uncertainty

Standard & Poor’s analyst Jason Asaeda has a hold rating on Ralph Lauren shares. The company’s prospects are constrained in the near term by global economic uncertainty, he writes.

“We continue to see ample opportunities for RL to further penetrate the global premium apparel market, via geographic and product diversification, and a tiered pricing strategy that appeals to a broad range of shoppers spanning the high end to value,” Asaeda says.

“We view e-commerce as a largely untapped growth driver in Europe and see substantial long-term growth opportunities in Asia, which contributed about 12 percent of net revenues in fiscal 2011.”

The company next reports earnings Feb. 8.