Dickson may lose its shirt as top brands go it alone
Tuesday, February 17, 2009
Dickson Concepts (0113) could be losing its shirt, analysts warned yesterday, after the luxury-goods retailer said its rights to distribute Polo and Ralph Lauren products in Asia will expire at the end of the year.
The loss of one of Dickson's biggest revenue streams - at a time when retail sales are already slowing dramatically - is expected to deal a heavy blow to the company, which also operates Seibu and Harvey Nichols department stores in Greater China.
"Polo is one of its largest clients," an analyst said. "Dickson's revenues will definitely fall significantly."
Dickson Concepts held the license for more than 20 years. Polo Ralph Lauren Corp will take over the retail and distribution operations in Asia itself in 2010 in line with its worldwide strategy, a Dickson spokeswoman said. Polo Ralph Lauren has already started running its own stores in Europe and Japan, replacing earlier licensing deals.
Dickson's license to sell, manufacture and import certain products under the Polo and Ralph Lauren brandnames in Greater China and Southeast Asia was extended to December 31, from the original expiration date of February 13, Dickson said in a stock-exchange announcement yesterday.
Polo Ralph Lauren will pay Dickson US$18.2 million (HK$141.96 million) after the license expires, Dickson said. It is not clear why Polo Ralph Lauren is making a payment to Dickson.
A Dickson spokeswoman only said: "This is the payment agreed with Polo Ralph Lauren as part of the transition."
Although Dickson does not break out revenue figures for its individual brands, the analyst said Polo distribution probably accounts for about 10 percent of Dickson's revenues.
But the Dickson spokeswoman claimed there will be no adverse impact on the group's profit in the near term.
"It is inappropriate for us to make a forecast on the group's future profit, especially given the current uncertain economic situation," she added.
She said Dickson will continue to develop its other luxury brandname operations, including Brooks Brothers and Tommy Hilfiger.
It will also continue to seek new brands to add to its portfolio.
The analyst said it may be difficult for Dickson to sign up distribution deals with other quality brands to replace Polo.
"I don't doubt it will be able to sign up new brands, but it's the quality, the size and the break-even period for those new brands that matter," he said.