Ralph Lauren's Billion-Dollar Polo Brand Expansion

Fresh from a rare interview as one of Oprah Winfrey's last guests and seeing First Lady Michelle Obama dazzle this week in one of his couture designs, American fashion icon Ralph Lauren is in the spotlight this week.

His Polo Ralph Lauren Corp. may have had its net income decline almost 36%, bringing in “only” $73.2 million, in the fourth quarter that ended April 2nd (prompting at least one analyst to issue a 'buy' recommendation for its stock), but that isn’t stopping the company from investing a cool $1 billion to expand its global retail operation, according to Women’s Wear Daily.

Roger Farah, president and COO of Polo Ralph Lauren, told WWD that in the next fiscal year, $325 million of that would be laid out, with 70% of the cash would go to “growing the company’s store base internationally, particularly in Europe and through concession shops in China and Hong Kong.” But Polo won’t be just throwing money new retail locations.

The 42-year-old New York City-based company, which currently has 179 retail operations worldwide, will be pulling up stakes where a store is underperforming. WWD reports that Polo will be “exiting 65 locations over the next 12 months” just in Asia, as it reviews its retail operations and makes some tough decisions.

The drop in revenue in the just-reported quarter was partially due to the rising price of cotton, as well as the dropoff in spending in Japan in the wake of that nation's tsunami/nuclear crisis. Those costs hadn’t been passed along to consumers, but that appears to be changing in the next year.

“In certain product categories we saw single-digit cost increases; in some others it was up to a 20% price increase,” Farah said, according to WWD. “The fall product is being delivered in the next couple of months. We’ve raised prices where we can make the adjustments and customers will still respond" by buying where they see value, he added.

He went on to say that the company was concerned for the moderate consumer, who is already being squeezed with the rising price of gas (which they presumably need to get them to their nearest Polo Ralph Lauren retailer). “In that sector we were more sensitive to passing along price increases,” Farah said.