Penney’s billion dollar gamble on Ralph Lauren

by Alexandra Biesada, February 21st, 2008, 6:01 am

Ralph Lauren is coming soon to a J.C. Penney store near you. Actually the blue-eyed arbiter of American WASP style won’t be appearing in person. Rather, Ralph’s new American Living brand of apparel and home furnishings, created by Polo Ralph Lauren’s Global Brand Concepts, debuts in some 600 Penney stores and online this week. The launch of the extensive line of all-American merchandise includes some 40 categories, including apparel, bedding and bath items, and luggage.

As you might expect from the father of preppy style, the American Living collection includes plenty of seersucker, Madras plaid, boating-inspired fashions, and, of course, polo shirts. However, Ralph’s signature polo pony logo is conspicuously absent, replaced by an eagle with an American flag grasped firmly in its talons.

The American Living line marks the first time Polo Ralph Lauren has created a brand for another retailer. Mid-market Penney and the man behind preppy Polo may seem an unlikely pair. The New York Times‘ adman Stuart Elliott coined the phrase “Polo Penney” to describe the blending of the two disparate brands. But Penney has met with prior success in its march up-market. In 2006 the retailer began opening in-store Sephora shops that sell expensive cosmetics and fragrances. The introduction of the upscale Sephora brand is said to cast a “halo effect” on Penney’s stores, which the company hopes will be intensified by its collaboration with Ralph Lauren.

Penney says the American Living line and launch have been in the works for a year, which may explain the unfortunate timing of the brand’s debut. It takes guts to introduce a collection priced at about 15% above your highest-end merchandise when retail sales (including Penney’s own) are slumping and pinched consumers are cutting back on spending. Are Penney shoppers going to want to spend $75 on an American Living Logo hoodie or $45 for a polo shirt? Ominously, while perusing the American Living Web site, I saw that already some of the merchandise (including dresses, shoes, shirts, and luggage) is marked down by up to 30% and the goods have yet reached store shelves!

Certainly Penney has the deep pockets and merchandising expertise to ride out a badly-timed launch; even one as massive as American Living, which the company says is the largest in its history. In fact, Penney CEO Myron Ullman says he expects AL to be a billion-dollar business in several years. (Two of Penney’s other private brands, Arizona and St. John’s Bay, are each billion-dollar sellers.)

Even if AL gets off to a bumpy start, Penney’s association with Polo Ralph Lauren can only burnish the chain’s image and help in its battle for market share with archrival Macy’s. While Macy’s has relationships with designer Oscar de la Renta and domestic diva Martha Stewart, neither has the broad star appeal of all-American Ralph Lauren.