Polo Ralph Lauren Executive Summary Ralph Lauren is one of fashions leading retailers, who has had great success in creating great demand for their clothing line. In 2003 the fashion industry struggled with the plummeting economy, and a major concern was cutting costs while gaining productivity. Polo Ralph Lauren also felt the economic pressures, the company was able to compensate by targeting European and Japanese markets. According to Polo Ralph Lauren, in terms of growth strategies, “We have a global retail initiative that includes selectively opening new stores and acquiring licensed stores in key markets.” Another key strategy is to continue expanding products to new markets. This is the most important key for this companies futuristically success. The third strategy for growth is the need to improve operational efficiency, in terms of management and organizational components. This will allow Polo Ralph Lauren to create an increased functionality in the company. The company has already set out to do this by creating a centralized headquarters in Switzerland instead of setting up 5 headquarters internationally. The final key for growth is acquiring “direct ownership of those businesses where our expertise and competencies provide the highest value, while
Transcript
Polo Ralph LaurenExecutive Summary
Ralph Lauren is one of fashions leading retailers, who has had great success in creating great demand for their clothing line. In 2003 the fashion industry struggled with the plummeting economy, and a
major concern was cutting costs while gaining productivity. Polo Ralph Lauren also felt the economic pressures, the company was able to compensate by targeting European and Japanese
markets. According to Polo Ralph Lauren, in terms of growth strategies, “We have a global retail initiative that includes selectively opening new stores and acquiring licensed stores in key markets.” Another key strategy is to continue expanding products to new markets. This is the most important key for this companies futuristically success. The third strategy for growth is the need to improve
operational efficiency, in terms of management and organizational components. This will allow Polo Ralph Lauren to create an increased functionality in the company. The company has already set out to do this by creating a centralized headquarters in Switzerland instead of setting up 5 headquarters internationally. The final key for growth is acquiring “direct ownership of those businesses where our expertise and competencies provide the highest value, while continuing to seek new licensing partnerships where appropriate”. With these goals for growth set before Polo Ralph Lauren the
company will gain a great momentum heading into Fiscal Year 2004 and 2005
• Independent Auditors: Deloitte & Touche LLP• The auditors believe that Polo Ralph Lauren conformed
with the Accounting Principles. There were changes in the accounting methods for goodwill and intangible asset accounts, in order to meet Accounting Standards for the 2003 Fiscal Year.
• Dividend Per Share: $.20• Date of Information: March 29, 2003
• I would not suggest buying stock in Polo Ralph Lauren based on the low amount a stockholder yields. However, the shareholder might expect some of their returns to come from increases in the end price of the shares.
PlansBases on Polo Ralph Lauren’s three-year analysis, it seems the company has increased dramatically in sales since Fiscal Year 2001. Reasons for this include targeting markets in Japan and Europe, and the virtual Ralph Lauren website. Both changes have allowed the company to target great audiences with their products.
Ralph Lauren has had some setbacks. For Fiscal Year 2003, a serious lawsuit against Ralph Lauren has created problems
Futuristically, Polo Ralph Lauren plans to continue developing European and Japanese markets through a process of consolidating the company from having “5 international headquarters in 3 countries into one central European headquarters in Geneva, Switzerland”. In order to effectively centralize the International front, Ralph Lauren plans to upgrade the information support systems already in place to be more efficient and effective. Ralph Lauren expects successful long-term growth from these strategies.
Another avenue for growth is in fashion. This year, traditional tailored suits will be the latest trend in the fashion industry. This is one of Ralph Lauren’s specialties. Sales are expected to rise in all quarters as a result. Also, Polo Ralph Lauren recently launched “a heritage-inspired collection with a weekend influence. The new line has exceeded expectations, domestically and internationally”.
• Comment: Although Polo Ralph Lauren has increased overall revenue, we also see a dramatic increase in expenses as well.
Polo Ralph LaurenBalance Sheet
• Comment: Overall, Polo Ralph Lauren seems to be doing better in Fiscal Year 2003. However, there are problems when looking at increases in Liabilities. We see major increases in short-term borrowing and Accounts Payable. This poses problems since one of the goals for Fiscal Year 2003 was to reduce short and long term debt.
Polo Ralph LaurenPolo Ralph LaurenStatement of Cash FlowStatement of Cash Flow
Cash Flow operations are more than net incomeCash Flow operations are more than net incomePolo Ralph Lauren is growing through investing Polo Ralph Lauren is growing through investing in property and equipment, acquisitions, and in property and equipment, acquisitions, and long-term investmentslong-term investmentsPolo Ralph Lauren’s primary source of financing Polo Ralph Lauren’s primary source of financing is long-term loansis long-term loansCash has increased for Fiscal Year 2003Cash has increased for Fiscal Year 2003
Polo Ralph LaurenAccounting Policies
• The Securities & Exchange Commission developed the following conditions that must be met before revenue is recognized
1) Persuasive evidence of an arrangement exists2) Delivery has occurred or services have been rendered3) The seller’s price to the buyer is fixed or determinable4) Collectibility is reasonable assured
Polo Ralph LaurenPolo Ralph LaurenFinancial Analysis Profitability Financial Analysis Profitability
RatiosRatios
Profit Margin: 7.9%Profit Margin: 7.9%Measures Net Income produced by each dollar of salesMeasures Net Income produced by each dollar of sales
Asset Turnover: 1.16Asset Turnover: 1.16How efficient assets are used to produce salesHow efficient assets are used to produce sales
Return on Assets: 9%Return on Assets: 9%Measure of overall ProfitabilityMeasure of overall Profitability
Return on Equity: 15.8%Return on Equity: 15.8%Measure of profitability of Investments by the Stock HoldersMeasure of profitability of Investments by the Stock Holders
Polo Ralph LaurenFinancial Analysis Solvency Ratio
Debt to Equity: 68.7%Measure of capital structure and leverage. Polo Ralph Lauren is mostly run by
Stockholders not Creditors.
Polo Ralph LaurenPolo Ralph LaurenFinancial Analysis Market Strength Financial Analysis Market Strength
RatiosRatios
Price/Earnings Per Share: 17.4Price/Earnings Per Share: 17.4Measures Investors confidence in a companyMeasures Investors confidence in a company
Dividend Yield: 1.77Dividend Yield: 1.77Measures a stock’s current return to an investor through dividendsMeasures a stock’s current return to an investor through dividends
