Jon: I don't completely understand your logic; your analysis seems to make several assumptions which may or may not be valid. Just because companies such as Brioni don't sell lesser lines or license their names for perfumes, etc. (although Brioni does have Brioni Sport, and Brioni ties, socks, and shirts, never mind Kiton cologne!
, that does not necessarily mean that the RLPL line is not designed to provide a "halo" effect for the rest of the Lauren brands, or at least the Polo brand. Or, perhaps it is done as an ego trip for Ralph? (See Mercedes-Benz [Maybach] and/or Volkswagon [Phaeton] for examples of other companies that may arguably be introducing higher end products for these reasons.) Unless you are privy to the strategic and financial planning of the company, you will be hard pressed to prove your point (as will I to prove the contrary); moreover, a company's motivation may change over time. Perhaps when RLPL was first developed, the company hoped to generate a profit, but maybe reality/experience has forced them to change their rationale. I for one am skeptical that they generate much profit from the Purple Label line, seeing how little of it they seem to sell, and how much of it seems to be sold at steep discounts at the end of the season. I could be wrong, but I would bet you alot of money that the Purple Label line is considerably less profitable than the regular Polo line (measured by profit as a % of revenues.) Of course, depending on how one decides to handle cost allocations - particularly of advertising dollars and other overhead costs -, one can reach different conclusions about a product line's profitability, even if you have the numbers. Second, revenue and profit are certainly not the same thing. Historically, the company made a lot more profit through the wholesale business than the retail business, though this changed in 2004. If you look at the operating profit of the licensing business, you can see how profitable this can be (and hence why so many companies are so aggressive in licensing their names for perfumes, soaps, etc). The profits in 2004 of the licensing business were close to the combined profits of the retail and wholesale businesses, in spite of the far lower revenues, because the licensing revenues don't really have any product costs associated with them (i.e. gross margins on these revenues are 100%). This again argues for the value to the company of its image, which is affected by the Purple Label line. As for the discussion of the two separate lines of business, retail and wholesale, and how this proves RLPL is oriented along profitabilty lines, this argument makes no sense to me. The company is trying to maximize overall profitability. If it thinks that the RLPL line will improve its image, and thereby drive sales of its other lines in both the retail and wholesale channel, how does that prove the line is operated to be profitable in its own right? Again, I don't know whether the RLPL line is profitable in its own right, nor do I know if it is designed to generate a standalone profit. I just know that there a legitimate reasons why the line could be justified for reasons beyond its own profitability.