Polo Ralph Lauren Corporation, founded in 1967 by Ralph Lauren, is a global leader in the design, marketing and distribution of premium lifestyle products, including men’s, women’s and children’s apparel, accessories, fragrances and home furnishings. We believe that our global reach, breadth of product and multi-channel distribution is unique among luxury and apparel companies. We operate in three distinct but integrated segments: Wholesale, Retail and Licensing.
Over the past five fiscal years, our sales have grown to $5.019 billion in Fiscal 2009 from $3.305 billion in Fiscal 2005. This growth has been largely a result of both our acquisitions and organic growth. We have diversified our business by channels of distribution, price point and target consumer, as well as by geography. Our global reach is one of the broadest in the apparel industry, with Ralph Lauren-branded merchandise available at approximately 6,100 different retail locations worldwide. In addition to our wholesale distribution, we sell directly to customers throughout the world via 326 full-price and factory retail stores and our e-commerce websites, RalphLauren.com and Rugby.com.
We continue to invest in our business. In the past five fiscal years, we have invested approximately $2.0 billion for acquisitions and capital improvements, primarily through strong operating cash flow. We intend to continue to execute our long-term strategy of expanding our presence internationally, extending our direct-to-consumer reach, and expanding our accessories and other product offerings. See Item 7 — “Overview — Our Objectives and Risks” for further discussion of the Company’s long-term strategy.
We have been controlled by the Lauren family since the founding of our Company. As of March 28, 2009, Mr. Ralph Lauren, or entities controlled by Mr. Ralph Lauren, owned approximately 86% of the voting power of the outstanding common stock of the Company.
Seasonality of Business
Our business is typically affected by seasonal trends, with higher levels of wholesale sales in our second and fourth quarters and higher retail sales in our second and third quarters. These trends result primarily from the timing of seasonal wholesale shipments and key vacation travel, back-to-school and holiday shopping periods in the Retail segment. As a result of the growth and other changes in our business, along with changes in consumer spending patterns and the macroeconomic environment, historical quarterly operating trends and working capital requirements may not be indicative of future performances. In addition, fluctuations in sales, operating income and cash flows in any fiscal quarter may be affected by, among other things, the timing of seasonal wholesale shipments and other events affecting retail sales.
Working capital requirements vary throughout the year. Working capital typically increases during the first half of the fiscal year as inventory builds to support peak shipping/selling periods and, accordingly, typically decreases during the second half of the fiscal year as inventory is shipped/sold. Cash provided by operating activities is typically higher in the second half of the fiscal year due to higher net income and reduced working capital requirements during that period.
Agreement to Acquire Southeast Asia Licensed Operations
In February 2009, the Company entered into an agreement with Dickson Concepts International Limited (“Dickson”) to assume direct control of its Polo-branded licensed apparel businesses in Southeast Asia effective January 1, 2010 in exchange for a payment of $20 million and certain other consideration. Dickson is currently the Company’s licensee for Polo-branded apparel in the Southeast Asia region, which is comprised of China, Hong Kong, Indonesia, Malaysia, the Philippines, Singapore, Taiwan and Thailand. In connection with this agreement, the Company entered into a one-year extension of its underlying sub-license agreement with Dickson, which was originally scheduled to expire on December 31, 2008. The transaction is subject to certain customary closing conditions.
Japanese Childrenswear and Golf Acquisition
On August 1, 2008, in connection with the transition of the Polo-branded childrenswear and golf apparel businesses in Japan from a licensed to a wholly owned operation, the Company acquired certain net assets (including inventory) from Naigai Co. Ltd. (“Naigai”) in exchange for a payment of approximately ¥2.8 billion (approximately $26 million as of the acquisition date) and certain other consideration (the “Japanese Childrenswear and Golf Acquisition”). The Company funded the Japanese Childrenswear and Golf Acquisition with available cash on-hand. Naigai was the Company’s licensee for childrenswear, golf apparel and hosiery under the Polo by Ralph Lauren and Ralph Lauren brands in Japan. In conjunction with the Japanese Childrenswear and Golf Acquisition, the Company also entered into an additional 5-year licensing and design-related agreement with Naigai for Polo and Chaps-branded hosiery in Japan and a transition services agreement for the provision of a variety of operational, human resources and information systems-related services over a period of up to eighteen months from the date of the closing of the transaction.
The results of operations for the Polo-branded childrenswear and golf apparel businesses in Japan have been consolidated in the Company’s results of operations commencing August 2, 2008.
Our Brands and Products
Since 1967, our distinctive brand image has been consistently developed across an expanding number of products, price tiers and markets. Our brands, which include apparel, accessories and fragrance collections for men and women as well as childrenswear and home furnishings, comprise one of the world’s most widely recognized families of consumer brands. Reflecting a distinctive American perspective, we have been an innovator in aspirational lifestyle branding and believe that, under the direction of internationally renowned designer Ralph Lauren, we have had a considerable influence on the way people dress and the way that fashion is advertised throughout the world. We combine consumer insight with our design, marketing and imaging skills to offer, along with our licensing alliances, broad lifestyle product collections with a unified vision:
• Apparel — Products include extensive collections of men’s, women’s and children’s clothing;
• Accessories — Products encompass a broad range, including footwear, eyewear, watches, jewelry, hats, belts and leathergoods, including handbags and luggage;
• Home — Coordinated products for the home include bedding and bath products, furniture, fabric and wallpaper, paint, tabletop and giftware; and
• Fragrance — Fragrance products are sold under our Romance, Polo, Lauren, Safari, Ralph and Black Label brands, among others.
Our lifestyle brand image is reinforced by our RalphLauren.com and Rugby.com internet sites.
Ralph Lauren Purple Label
A contemporary take on traditional bespoke tailoring, Ralph Lauren Purple Label is the ultimate expression of modern elegance for men. From precisely tailored Made-to-Measure suits to sophisticated sportswear, Purple Label reflects an impeccable sense of the dashing and refined, fashioned from exclusive, limited-edition fabrics of the highest quality and expertly crafted in the spirit of Savile Row tailoring. Ralph Lauren Purple Label also offers Made-to-Order dress furnishings, accessories, luggage and benchmade footwear, as well as hand monogramming and custom engraving services. Ralph Lauren Purple Label competes with the finest men’s hand-tailored clothing lines. Ralph Lauren Purple Label is available primarily in Ralph Lauren stores, but is also available through specialty stores, fine department stores and online at RalphLauren.com.
Ralph Lauren Black Label for Men
Reflecting a sharp, modern attitude, Ralph Lauren Black Label is the essence of sophisticated dressing for men. Featuring razor-sharp tailoring and dramatically lean silhouettes, classic suitings and sportswear are infused with a savvier attitude for a look that is at once modern and timeless. Iconic yet fresh, Ralph Lauren Black Label represents a new chapter in men’s style. Ralph Lauren Black Label creates a unique niche among the finest contemporary tailored clothing lines and modern sportswear. Ralph Lauren Black Label is available in Ralph Lauren stores, a limited selection of specialty stores and better department stores and online at RalphLauren.com.
Polo Ralph Lauren
Classic and authentic, Polo is the foundation of the world of Ralph Lauren menswear, combining the time-honored aesthetic of East Coast Ivy League casual style with proper English refinement. Often imitated but never matched, Polo is the original symbol of the preppy lifestyle. The iconic polo player logo is recognized worldwide as a symbol of heritage and authenticity. From classic favorites such as oxford shirts and chino pants to modern collections that combine heritage preppy with a chic, downtown feel, Polo sets the standard for a well-worn look with an aspirational sensibility, creating a comprehensive line of sportswear, tailored clothing and accessories to fulfill a man’s every wardrobe need. Polo leads the industry of fine men’s sportswear brands. Polo is available in Ralph Lauren stores, department stores, specialty stores and RalphLauren.com. The Polo Ralph Lauren Denim collection features premium denim with authentic detailing and the highest quality workmanship in the tradition of Ralph Lauren. From rugged looks to jeans that walked the runway, Polo Ralph Lauren Denim presents an extensive variety of superior fits, modern designs and innovative washes. Polo Ralph Lauren Denim competes with premium-quality designer collections. Polo Ralph Lauren Denim styles are available in department stores and online at RalphLauren.com.
Lauren for Men
Created to broaden the reach of the Ralph Lauren men’s statement, Lauren for Men conveys a spirit of tradition while recalling the sophistication of Polo Ralph Lauren menswear. Classic and polished, the Lauren men’s line includes suits, sport coats, dress shirts, dress pants, tuxedos, topcoats and ties. Designed to fulfill every tailored clothing need, this comprehensive line of men’s dress wear competes with other men’s designer fashion lines. Lauren for Men is available at select department stores.
Ralph by Ralph Lauren
The Ralph by Ralph Lauren collection features suits, sport coats, dress trousers, suit vests and top coats designed with the classic style and fine fabrics for which Ralph Lauren is known. Refined construction details — all hallmarks of better men’s suitings — and a range of timeless patterns and colors establish Ralph by Ralph Lauren as a strong foundation for the modern man’s wardrobe. Ralph by Ralph Lauren is available exclusively at Dillard’s stores.
Ralph Lauren Collection
The crown jewel of Ralph Lauren womenswear, Collection makes its dramatic first appearance each season on the runways of New York, providing the fashion world with the season’s definitive Ralph Lauren style statement.
Embodying glamour and sophistication, Collection’s distinctive couture sensibility is expressed though modern yet timeless silhouettes — expertly crafted from the finest luxury fabrics — reflecting the epitome of bold femininity and rarefied chic as only Ralph Lauren can express it. Ralph Lauren Collection competes with the finest designer collections found in Paris, Milan and New York. Ralph Lauren Collection is sold primarily in Ralph Lauren stores. Select pieces are also available through specialty stores, the finest department stores and online at RalphLauren.com.
Ralph Lauren Black Label for Women
Sophisticated and classic with a modern edge, Black Label translates the luxurious spirit of Ralph Lauren Collection into a distinctive, timeless collection of icons for town, country, day and evening. Created from the finest materials, Black Label silhouettes — elegant and striking — are the cornerstones of the Ralph Lauren woman’s wardrobe. Black Label competes with the finest women’s collections — the “gold tier” of wholesale brands. Black Label is offered primarily in Ralph Lauren stores. Select pieces are also available in designer boutiques, fine specialty stores, better department stores and online at RalphLauren.com.
Ralph Lauren Blue Label
Fresh and eclectic with a sexy, youthful spirit, Blue Label embodies the Ralph Lauren sensibility through heritage looks with a chic, modern twist. Whether reflecting Ivy League-inspired style, a modern take on proper English refinement or a feminine translation of the rugged spirit of the American West, Blue Label creates a mix of style that is eclectic, timeless and unmistakably Ralph Lauren. Blue Label occupies a unique niche in the women’s sportswear market. Blue Label is offered in Ralph Lauren stores in the United States and Europe, RalphLauren.com and better department stores in Asia.
Lauren by Ralph Lauren
Created to broaden the reach of the Ralph Lauren statement for women, Lauren conveys a spirit of heritage and tradition while recalling the sophisticated luxury of Black Label. Timeless and perfectly polished, Lauren features a wide range of apparel ideal for every occasion, including suits, sportswear, dresses, outerwear, footwear and accessories. Lauren Active infuses a country club sensibility into practical sports apparel, creating fashionable wardrobe solutions for golf, tennis, yoga or weekend wear. Lauren competes with other designer fashion lines and is sold in department stores nationwide and online at RalphLauren.com. Lauren launched in Europe and Mexico in Spring 2009.
Lauren Jeans Co.
Lauren presents a fresh perspective on the denim lifestyle with Lauren Jeans Co., which is defined by a breadth of styling, consistent standard of fits and signature collection of separates that can take the Lauren woman anywhere. Lauren Jeans Co. features a wide variety of silhouettes, treatments and looks, adding a new dimension to Lauren style. Lauren Jeans Co. competes with other designer denim lines. Lauren Jeans Co. is offered in department stores nationwide and online at RalphLauren.com.
Pink Pony is Polo Ralph Lauren’s worldwide initiative in the fight against cancer. Pink Pony supports programs for early diagnosis, education, treatment and research, and is dedicated to bringing patient navigation and quality cancer care to medically underserved communities. A percentage of sales from all Pink Pony products benefits the Pink Pony Fund. Pink Pony apparel consists of feminine, slim-fitting women’s sportswear items and accessories crafted in luxurious fabrics. Hooded sweatshirts, cotton mesh polos, canvas tote bags and cashmere yoga pants all feature our iconic pink Polo Player — a symbol of our commitment to the fight against cancer. Pink Pony is available at select Ralph Lauren stores and online at RalphLauren.com. To learn more about Pink Pony and Polo Ralph Lauren’s other philanthropic efforts, please visit RalphLauren.com/Philanthropy.
Embodying the cool, rugged spirit of classic Western Americana, RRL is inspired by an authentic sensibility, providing distinctive designs and a selection of vintage pieces for men and women. From weathered blue jeans, distressed leather jackets and Western shirts to one-of-a-kind belts and cowboy boots, RRL evokes the bohemian freedom of the frontier borderlands — uniquely Ralph Lauren, distinctly American. RRL competes with a wide range of new and vintage clothing lines that pique the interest of collectors of unique American style. RRL is available exclusively at freestanding RRL stores and select Ralph Lauren stores.
Created to answer the demands of dedicated athletes for superior high-performance outfitting, RLX provides gear that unites the highest standards of quality, design and technology. The result is a line of cutting edge athletic fashion with an unmistakable respect for both functionality and style. Utilizing a network of alliances among the RLX design team, world-class athletes and makers of the most innovative fabrics available, RLX helps athletes overcome the challenges encountered in disciplines as varied as wintersports, tennis, golf, sailing and cycling. RLX competes with leading providers of fashionable high-performance activewear. The complete RLX Ski line is available at the RLX flagship store in Aspen, Colorado. Select RLX products are available at additional Ralph Lauren stores and online at RalphLauren.com. The RLX Golf collection — proud to sponsor professional golfer Luke Donald — is available at select private golf clubs and resorts.
Polo Golf and Ralph Lauren Golf
Rooted in the design heritage of Ralph Lauren, Polo Golf and Ralph Lauren Golf feature men’s and women’s luxury technical performance wear that travels effortlessly between the course and the clubhouse. Polo Golf is a proud sponsor of pro golfers Tom Watson, Davis Love III and Jonathan Byrd. Ralph Lauren Golf is proud to sponsor Morgan Pressel — the youngest champion in LPGA Tour history. Polo Golf and Ralph Lauren Golf collections compete with the highest-quality providers of men’s and women’s golf apparel, and are available in the most exclusive private clubs and resorts. The Golf collections are also available at RalphLauren.com.
Rugby, a relatively new concept from Ralph Lauren, is where casual campus style meets downtown prep for a sensibility that is youthful and, at times, irreverent. The signature of the brand is the authentic rugby shirt, a symbol of our classic, sporting heritage. From rebellious, sport-inspired looks for men to sharp, sexy campus styles for women, Rugby embraces a lasting sense of timeless individuality and offers apparel and accessories for everyday wear — from rugbys, polos, chinos and oxfords to specialty pieces such as jackets, denim, dresses and outerwear, all pushed to the edge of prep. Launched in 2004, the Rugby collections are available at Rugby stores throughout the United States, with a flagship at 99 University Place in New York City, and online at Rugby.com.
Ralph Lauren Childrenswear
Reflecting the signature spirit of Ralph Lauren, our children’s collections provide timeless style for kids of all ages — from Layette to Toddler to Girls size 16 and Boys size 20. Featuring seasonal looks as well as the full range of classic Ralph Lauren styles — including classic polos, oxford shirts, navy blazers and our luxurious cashmere — Ralph Lauren Childrenswear brings style to everyday dressing and special occasions. Ralph Lauren Childrenswear leads the industry in fine designer clothing for children. Ralph Lauren Childrenswear can be found in select Ralph Lauren stores, better department stores and online at RalphLauren.com.
In addition to his apparel, fragrance and home collections, Ralph Lauren has created a wide array of accessories and dress furnishings that reflect his vision of timeless elegance. Each Ralph Lauren women’s collection features handbags, scarves, belts, sunglasses, watches, jewelry and footwear fashioned from the most luxurious materials in the world with exquisitely crafted hardware and finishing touches. Men’s furnishings, including sunglasses, watches, neckwear, footwear, leathergoods, luggage, cuff links and formalwear accents, are similarly refined. Ralph Lauren Accessories compete with the finest international designer collections. Ralph Lauren Accessories are available in Ralph Lauren stores, select specialty stores and online at RalphLauren.com. Eyewear is available in all domestic Ralph Lauren stores, including the Ralph Lauren Madison Avenue Eyewear store, select optical/sunglass retailers and online at RalphLauren.com.
In 1978, Ralph Lauren expanded his lifestyle brand to encompass the world of fragrance, launching Lauren for women and Polo for men. Since then, Ralph Lauren Fragrance has captured the essence of Ralph Lauren’s men’s and women’s brands, from the timeless heritage of Lauren and Polo to the sophisticated beauty of Polo Black for men and Romance for women to the modern, fresh Ralph fragrances for her, designed to appeal to a younger audience. Men’s fragrances include Safari, Polo Sport, Polo Blue, Romance, Romance Silver, Purple Label, Explorer, Polo Black and Double Black. Women’s fragrances include Safari, Polo Sport, Ralph Lauren Blue, Lauren, Romance, Ralph, Ralph Hot, Ralph Rocks and Love. Ralph Lauren fragrances compete with better department store brands and designer fragrances. Ralph Lauren fragrances are available in department stores, specialty and duty free stores, perfumeries and online at RalphLauren.com.
Ralph Lauren Home
As the first American designer to create an all-encompassing collection for the home, Ralph Lauren presents a comprehensive lifestyle experience featuring complete, luxurious worlds for the home. Whether inspired by timeless tradition or reflecting the utmost in modern sophistication, each of the collections is distinguished by the enduring style and expert craftsmanship of Ralph Lauren. The Home collections include bed and bath linens, china, crystal, silver, decorative accessories, gifts, garden and beach, as well as lighting, window hardware, furniture, fabric, trimmings and wallcovering. Ralph Lauren Home competes with providers of the finest home design products. Ralph Lauren Home offers exclusive luxury goods at select Ralph Lauren stores, trade showrooms and online at RalphLauren.com. An assortment of items is also available at select department stores and home specialty stores. The complete world of Ralph Lauren Home can be explored online at RalphLaurenHome.com.
In the spirit of Ralph Lauren and impeccably designed for timeless style, Lauren Home offers a wide array of bedding, bath, tabletop, gifts, decorative accessories, floorcovering and lighting collections for the well-appointed home. Lauren Home is available in department stores, select home specialty stores and at LaurenHome.com. Lauren Spa, a refreshing collection of organic bedding and bath launched in 2007, is available at select department stores and online.
Ralph Lauren Paint
Introduced in 1995, Ralph Lauren Paint offers exceptional-quality interior paint ranked high in the industry for performance. Inspired by classic and modern lifestyles from the world of Ralph Lauren, Ralph Lauren Paint features a signature palette of over 500 colors and a collection of unique finishes and innovative techniques. An extension of the Ralph Lauren Home lifestyle, Ralph Lauren Paint is an attainable product designed to reach a broad yet selective audience. Ralph Lauren Paint is offered at select specialty stores and The Home Depot. The complete color palette, paint how-to’s and a guide to professional painters are online at RalphLaurenPaint.com.
Club Monaco is a dynamic, international retail concept that designs, manufactures and markets its own Club Monaco clothing and accessories. Each season, Club Monaco offers men’s and women’s updated classics and key fashion pieces that are the foundation of a modern wardrobe. The brand’s signature clean and modern style gives classics an update through great design and a current sensibility. Club Monaco is the lifestyle destination for today’s urban professional. Club Monaco clothing and accessories are available at Club Monaco stores throughout North America and, through licensing arrangements, in Hong Kong, Seoul and Dubai.
Global Brand Concepts
Launched exclusively at JCPenney in February 2008, American Living is a new tradition in American style for family and home, developed for the JCPenney customer by Polo Ralph Lauren’s Global Brand Concepts. American Living features menswear, womenswear, childrenswear, accessories and home furnishings capturing the American spirit with modern style and superior quality. A complete lifestyle brand for the entire family and the home, American Living mixes sporty, iconic essentials with eye-catching looks for a free-spirited take on contemporary style for every day. American Living is available exclusively at JCPenney and JCP.com.
Chaps translates the classic heritage and timeless aesthetic of Ralph Lauren into an accessible line for men, women, children and the home. From casual basics designed for versatility and ease of wear to smart, finely tailored silhouettes perfect for business and more formal occasions, Chaps creates interchangeable classics that are both enduring and affordable. The Chaps men’s collection is available at select department and specialty stores. The Chaps collections for women, children and the home are available only at Kohl’s and Kohls.com.
Our Wholesale Segment
Our Wholesale segment sells our products to leading upscale and certain mid-tier department stores, specialty stores and golf and pro shops, both domestically and internationally. We have focused on elevating our brand and improving productivity by reducing the number of unproductive doors within department stores in which our products are sold, improving in-store product assortment and presentation, and improving full-price sell-throughs to consumers. As of the end of Fiscal 2009, our Ralph Lauren-branded products were sold through approximately 6,100 doors worldwide and during Fiscal 2009, we invested approximately $35 million in related shop-within-shops primarily in domestic and international department and specialty stores.
Department stores are our major wholesale customers in North America. In Europe, our wholesale sales are a varying mix of sales to both department stores and specialty shops, depending on the country. Our collection brands — Women’s Ralph Lauren Collection and Black Label and Men’s Purple Label Collection and Black Label — are distributed through a limited number of premier fashion retailers. In addition, we sell excess and out-of-season products through secondary distribution channels, including our retail factory stores.
In Japan, our products are distributed primarily through shop-within-shops at premiere department stores. The mix of business is weighted to Polo Ralph Lauren in Men’s and Women’s Blue Label. The distribution of Men’s and Women’s Black Label is also expanding through shop-within-shop presentations in top tier department stores across Japan.
RalphLauren.com and Rugby.com
In addition to our stores, our Retail segment sells products online through our e-commerce websites, RalphLauren.com (http://www.RalphLauren.com) and Rugby.com (http://www.Rugby.com).
RalphLauren.com offers our customers access to the full breadth of Ralph Lauren apparel, accessories and home products, allows us to reach retail customers on a multi-channel basis and reinforces the luxury image of our brands. RalphLauren.com averaged 2.9 million unique visitors a month and acquired approximately 350,000 new customers, resulting in 1.7 million total customers in Fiscal 2009.
In August 2008, the Company launched Rugby.com, its second e-commerce website. Rugby.com offers clothing and accessories for purchase — previously only available at Rugby stores — along with style tips, unique videos and blog-based content. Rugby.com offers an extensive array of Rugby products for young men and women within a full lifestyle destination.
As of March 28, 2009, we had approximately 17,000 employees, both full and part-time, consisting of approximately 12,000 in the U.S. and approximately 5,000 in foreign countries. 30 of our U.S. production and distribution employees in the womenswear business are members of UNITE HERE (which was previously known as the Union of Needletrades, Industrial and Textile Employees, prior to its merger with the Hotel Employees and Restaurant Employees International Union) under an industry association collective bargaining agreement, which our womenswear subsidiary has adopted. We consider our relations with both our union and non-union employees to be good.