Ralph Lauren: A Bronx Cowboy In Europe?

"It

's like trying to sell ice to the Eskimos," says a London fashion writer. "It's like trying to sell sand to the Arabs," sniffs an executive at a competing British fashion house. The news that Ralph Lauren, the icon of American style, is pushing hard to expand in Europe is being greeted with a certain degree of skepticism. And bitchiness. Who needs a mass American brand like Lauren's when you have the class of Armani, Zegna, Dior and Savile Row? Sure, Europeans are happy to wear a polo player by Lauren instead of an alligator by Lacoste when summering in Cannes. But will they want to don Lauren's $3,000 men's suits or $10,000 beaded dresses when they get back to Paris?

Lauren, 62, is no longer interested in selling simply the odd logo shirt or golf jacket. He wants nothing less than to meet the European designers head on. What's more, he feels he has to. Although Lauren is the world's biggest-selling fashion designer (retail customers spend more than $10 billion a year on products bearing the Ralph Lauren name), Wall Street dismisses Polo Ralph Lauren as just another apparel company. If financial analysts would consider it a purveyor of luxury goods, the stock price — and Lauren, who owns 89% of the company — would be all the richer.

But it isn't the thought of another home (he already has six), another vintage car (he has 60) or even the desire for a private plane (he has one of those too) that is pushing Lauren to expand. It's pride. Lauren doesn't talk about his stock price in monetary terms. He calls it "a report card, which gets issued every day." And right now — with the stock of Polo Ralph Lauren hovering around $20, some $10 less than its ipo price — the company is getting poor marks. "When I went public, I had a great business," Lauren says. "I don't think the company has gone backward." Global expansion, he hopes, will prove to Wall Street that he's not just a designer but a businessman too.

To that end, Lauren's license partner in Japan has pledged to spend $70 million in the next three years to renovate and revamp Polo stores there. But the company's biggest efforts are focused on Europe — outside of America, it's the part of the world where Lauren feels most comfortable. He was the first American designer to open a freestanding store in Europe, on London's New Bond Street in 1981. "I think I had something to say that wasn't being said before," he claims. His clothes not only brought idealized versions of preppy America or western America or sporty America to Europe but also reintroduced idealized versions of European classics to the very people who invented them. "When I first came to London, they didn't have what I thought they'd have," he recalls. "There were more Italian clothes than English ones." So Lauren presented the Brits with what he thought they should be buying: tweed jackets, jodhpurs, polo shirts. The New Bond Street store proved so successful that Polo added a second big store nearby, which has enjoyed double-digit growth since it opened in 1999.

But Lauren's main focus was still the U.S. business, which was booming. In just 14 years, Lauren had gone from selling the wide neckties he designed in 1967 to having the first in-store boutique for men in Manhattan's Bloomingdale's to being the first American designer with his own store, on Rodeo Drive in Beverly Hills, to having complete collections for men, women and boys, as well as his own accessories and fragrances. More firsts followed. In 1983 he introduced a collection of designer sheets and other home furnishings. In 1986 he opened the $14 million New York City flagship in the Rhinelander mansion on Madison Avenue and filled it with antiques. To critics who bemoaned the extravagance, Lauren effectively said, "It's the marketing, stupid." Now much of the real estate on upper Madison Avenue is devoted to similar showplaces in which designer after designer presents the lifestyle he or she is trying to promote.

Meanwhile, in Europe Lauren's business was growing too, but differently. Though stores were opening in Germany, Greece, France and the Netherlands, they were owned not by Lauren but by European licensees. And the clothes in them were made not by Lauren but by sublicensees. With so much going on in the U.S., it made sense for Lauren to leave Europe largely to the Europeans.

But now his strategy is shifting. To understand why, it helps to go back to his road show in the spring of 1997 to promote investment in his about-to-go-public company, Polo Ralph Lauren. An analyst asked Lauren a question that haunts him still: "You've been in business for 30 years; what do you have left?" Lauren brushed aside the question, and he got away with it — at first. With his initial public offering of stock, Lauren added $230 million to the company's capital and $440 million to his own fortune. The shares closed that day at $31.50. But in November 1998, the company missed its expected year-end earnings by 15 cents a share. It blamed warm weather and a weak economy. Analysts blamed what they saw as Lauren's inability to control spending. It's all those antique cricket bats in the stores, they cried. By the end of the month the stock fell to around $18.50. In May 2000 it reached an all-time low of $13.25.