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Apr 13 2007 10:59AM EDT

Ralph Lauren Buys Back Japanese License

Ralph Lauren has announced that they plan to buy back their Japanese license. They, and Burberry, both have a somewhat unique situation in Japan. In the early days of their existence (1978 for Ralph, 1940 for Burberry) someone decided to sign a license in a country that then seemed very far away.

Now of course that country is the world's biggest luxury market in the world. But neither the Ralph Lauren nor the Burberry brand is as luxury in Japan as it is elsewhere in the world. Both labels there target a more mainstream consumer. From a brand-building standpoint, it is awkward. Afterall, it's not like the Japanese don't get around. This inconsistent image is not going to help turn the Japanese luxury shopper into their customers. And from a balance sheet point of view, a brand would much rather have the margins on goods sold than an annual license fee.

Because of this, Redburn Partners luxury analyst Lisa Rachal said in a note that she expects Burberry will too buy back its Japanese license in the next three to five years. The license is due to expire in 2020. Sanyo, holders of the license, currently account for 65 percent of sales in Japan.

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