big pony polo shirt Jones Apparel May Lose License for Lauren Brand
The Jones Apparel Group warned yesterday that it could lose its license to produce a lucrative line of clothes for Polo Ralph Lauren because of poor sales for another line it makes for the designer.
Shares of Jones tumbled after the company said that sales of Polo’s Ralph brand had fallen short of minimum levels and that the license was set to expire at the end of 2003. Jones said Polo wanted to rescind Jones’s right to its more profitable Lauren license, which is scheduled to expire at the end of 2006.
Polo Ralph Lauren said it had the right to terminate existing licensing agreements based on Jones’s inability to meet certain minimums. ”We believe our rights are very clear, and we are confident in our legal position,” said Nancy Murray, a Polo spokeswoman.
The Ralph business generated $37 million in net sales in 2002, well below the $100 million minimum required in the agreement.
”We are very interested in a long term relationship with the company,” Peter A. Boneparth, the chief executive of Jones, said on a conference call.
Jones is prepared to take all necessary steps to enforce its rights under the Lauren license, Mr. Boneparth said in the company’s statement.
If the Lauren license were to end at the end of 2003, the expiration would hurt Jones’s operating results after 2003, the company said. But such a move would not seriously damage its liquidity, and its financial position would still be strong if the Lauren license were to end, Jones said.
Mr. Boneparth also said he would like to take the Lauren relationship substantially past 2006 but did not have a timetable on when the issue would be resolved.
Mitch Kummetz, an analyst at Wedbush Morgan, lowered his rating on Jones to hold from buy and estimated that the loss of the two licenses would most likely cost Jones about 50 cents a share in 2004 earnings.
Shares of Jones fell $2.57, or 8 percent, to $29.50, after plunging as low as $27.57. Jones is scheduled to report fourth quarter earnings today. Polo Ralph Lauren edged down 4 cents, to $21.09.