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Meanwhile in Europe, Lauren's business was growing too, but differently. Though stores were opening in Germany, Greece, France and the Netherlands, they weren't owned by Lauren, but by European licensees. And the clothes in them weren't made by Lauren either, 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 a 1997 roadshow 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?" Surrounded by encouraging investment bankers, Lauren brushed aside the question. After all, he was then embarked on an invasion into a territory notoriously hostile to American fashion designers Wall Street. Things went well, at first. With the offering Lauren added $230 million to the company's capital and $440 million to his own fortunes. The stock went from $26 a share at its launch to $31.50 by the end of the day. But in November 1998 the company missed its expected year-end earnings by 15� a share. The company 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 moaned. By the end of the month the stock fell to $18.50. In May 2000 it reached an all-time low of $13.25. It has never fully recovered. Today it trades at about $20.
Lauren is not shy about voicing his frustrations with Wall Street. After all, despite a few quarterly snags, the company has almost doubled earnings since going public. Yet the stock price won't budge. Securities analysts worry that Lauren relies too heavily on U.S. department stores, which are losing market share, for distribution. They see Ralph Lauren and Polo as mature brands, incapable of the growth Wall Street had got used to in the late 1990s.
When asked if he ever thinks about what the company would look like if he hadn't gone public Lauren says, "I think about it every day. When I went public I had a great business. I don't think the company has gone backward." He can talk eloquently about how he built the company slowly, to last. He can talk convincingly about what Ralph Lauren, the brand, has meant to America, the nation. But still, in the back of his brain is: "What do you have left?"
What Lauren has left is Europe. In fiscal 2002, which ended March 31, only 9.8% of Polo Ralph Lauren's wholesale revenues came from Europe. He also has Japan, which contributed only 10.5%. Come to think of it, his women's business is still smaller than his menswear, even though women spend twice as much on clothes. So he has that left. And, hey, Polo gets only 9.4% of its sales from accessories. Gucci earns 60%, so that's left to improve too.
But first, Europe. In 1998 the company spent $200 million buying back its key licensee, Poloco SAS of Paris, which had only been managing to increase sales in the single digits. And last summer Polo Ralph Lauren spent another $22 million buying out its Italian partner, PRL Fashions of Europe. A key Polo lieutenant, Lance Isham, moved to London to oversee the company's international development, and an Italian, Gian Luigi Longinotti-Buitoni, who had most recently been the ceo of Ferrari North America, was hired to manage day-to-day operations in Europe. Two years ago Lauren signed Spanish actress Pen�lope Cruz to be the face of the All-American brand, and in March he took the dramatic step of moving his men's fashion show from New York to Milan. That show, for fall, and the one for spring 2003 that followed last month were well received by the local press. "With Ralph Lauren Man is Elegant Again," said the Milan daily Corriere della Sera. The international press played up the competition between Lauren and the European king of menswear, Giorgio Armani. Again a compliment no such comparison was made when Calvin Klein staged his first men's shows in Italy. The moves have already begun to pay off. In 2002 European sales grew more than 30%, though from a very small base.