Industry competition, international expansion, and brand
identity will go a long way in shaping Polo Ralph Lauren's (
RL
) outlook as it competes against other premium apparel and
accessories players like Coach (
COH
), Liz Claiborne (
LIZ
) and
Ann
(
ANN
). Below we provide a brief synopsis regarding our expectations for
each of these key trends.
We have a
$111 price estimate for Polo Ralph Lauren's
stock
, about 10% below market price. While our price estimate currently
sits below market price, we have actually raised our number roughly
60% since mid-2010. During this time, Ralph Lauren's stock price
has seen a similar jump - up about 70%.
Increasing Competition from Private Labels
In recent years, private labels have accounted for an increasing
share of sales at department stores. This has hurt brands like Polo
Ralph Lauren, which derives a large portion of its revenues through
sales to department stores. The trend has forced Polo Ralph Lauren
to invest heavily in its own retail channel in order to remain
competitive.
We believe this trend will continue into the future as firms in
the highly competitive apparel industry realize the importance of
forward/backward integration for sustained growth.
International Expansion Will Help Sustain Growth
Facing increasing competition and slow growth in developed
markets, Polo Ralph Lauren has shifted its strategic focus to
expanding operations in emerging markets, particularly in Asia. The
South East Asian market is fast becoming a focal point of the
global retail industry, with major retailers across the globe fast
forwarding their plans of growing their presence in this
region.
As Asian consumers, backed by increasing disposable income, are
showing an inclination toward luxury goods, Polo Ralph Lauren can
leverage its image as a luxury retailer to gain a foothold in this
market.
Polo Ralph Lauren Has a Strong Brand
Identity
Polo Ralph Lauren's greatest competitive advantage has been its
ability to maintain the strength of its brand for the past twenty
years. While many fashion companies have struggled to retain
customers with the changing fashion trends, Polo Ralph Lauren has
not only remained strong but also leveraged its brand name
internationally.
In the fashion industry, notoriously marked with changing tastes
and short lived brand appeal, Polo seems to have an unassailable
competitive position.
Another advantage for Polo Ralph Lauren is its wide consumer
reach. With a large portfolio of brands, the company offers
products at every price point from discount (Chaps) to luxury
(Ralph Lauren Collection), widening its target demographic.
See our complete analysis of Polo Ralph Lauren
stock here