In Focus

Polo Ralph Lauren Corporation

Yee-haw! It's retail week! I know, we've been there before, but what can we say? Chicks love clothes! You already know the value of investing in classic garments, but is there any value in investing in the companies that make and/or sell them? That's a question I want answered and since it's not only a line of clothing, but an operator of 33 domestic stores and 118 factory outlets, I decided Polo Ralph Lauren (NYSE: RL) should be included in this week's focus.

Chicks like companies that stand the test of time. Whether or not we could actually live without their products or services may be too steep a criterion, but I think whether we could imagine them no longer in existence is a fair question. For example, although Disney is not a stock I'd purchase these days, it is a company that I can't see falling off the face of the earth anytime soon. I believe Polo Ralph Lauren is here to stay. Granted, its little polo pony emblem hasn't quite reached the status of mouse ears, however, I think Ralph Lauren has succeeded in permeating millions of homes with his classic sense of refined American style. Note I said homes, not closets. The range of product his company has its name on amazes me. They seem to have licensing agreements everywhere, from sunglasses to paint, yet unlike the proliferation of Georges Marcianno's Guess line years before, the illusion of exclusiveness remains. No easy task, I'm sure.

It's hard to believe that this company began only 33 years ago, when a dapper young man, untrained in fashion, decided a man's ultimate expression of taste was his tie. The narrow ties he produced of opulent materials and unexpected flamboyance, were an instant success in 1967. Ralph Lauren believed in longevity and timeliness, being the first to design clothes that portrayed a lifestyle. In fact, he chose the name "Polo" for his line because it described a sport that represented discretion, elegance and classic style.

Surprisingly, the famed emblem first appeared in 1971 on his women's line, tucked on the cuff of tailored shirts. 1972, however, saw the birth of the infamous Polo shirt that came in 24 colors (how many did you have?), foreshadowing the arrival of someone we all remember. the American preppy. It was the turned up collar and the heavy splashes of Polo cologne I choose to forget! The company has since transformed its style with subtlety, from outfitting Robert Redford and Mia Farrow in the film, "The Great Gatsby" with those fabulous styles of the 20's, to incorporating authentic western wear with such perfect nuance, creating fashion icons instead of victims.

In 1997, Chairman and CEO Ralph Lauren chose to take his company public. In 1999, RL acquired Club Monaco, lengthening its already expansive list of product lines. Most recently, Ralph Lauren Media (yet another subdivision of the corporation), launched Polo.com. A truly phenomenal site which includes an Ask Ralph section answering such questions as, "What's a great evening look for a snowy weekend?" You could go naked for all I care since I live in Los Angeles, but I know a couple of Minnesota Chicks that might want to hop onto that site and get the answer!

I really do love this company, from its high end, Ralph Lauren Black Label Collection, down to the more affordable Polo Jeans Co. Where else can you find a designer who is outfitting glamour queens for the Academy Awards and then turns around and sells paint in Home Depot and actually shows you how to make your walls look like they're dressed in denim? Just tell me one thing. why oh why are they sporting a Net Income that is a negative number? That's right, that turns its Net Margin into a negative number as well: -11% to be exact!

I'm so disappointed. I was encouraged when I started with their Gross Margin of 42%, but then it was all downhill. Cash vs. Long Term Debt is a low .45 and their Flow Ratio is a high 2.35. I guess, for now, we're better off with Polo Ralph Lauren hanging in our closets instead of sitting in our brokerage accounts. As I go now and slip into my luxurious Ralph Lauren bed sheets and lay atop my Polo featherbed, I pledge that I am not giving up on this company completely, perhaps they've proliferated so much, they merely need to catch up with themselves!

Hee-hee. Sounds like one of my New Year's resolutions!