Polo Ralph Lauren Corp has pulled the license to sell its products from Dickson Concepts (International), which operates Harvey Nichols, effective Jan 1.
In a statement to the Hong Kong stock exchange, Polo Ralph Lauren said: "The group (Dickson) will cease to be the authorized dealer of the licensed products in the territory. Polo Ralph Lauren Corp will pay $18.2 billion to the company upon the expiration of the license".
No further information was given.
"It's a very bad news for Dickson Concepts," said Zhang Xinbin, assistant professor of business marketing at Hong Kong Polytech University, adding that he's not surprised, given the global recession. "When people's job situations are uncertain, they don't think about getting unnecessary luxury items."
Polo Ralph Lauren, a New York-based designer of clothing and accessories, as well as household products, had designated Dickson Concepts to manufacture and sell clothes in Hong Kong, Indonesia, Malaysia, the Philippines, Singapore, Taiwan, Thailand and on the mainland.
Dickson lowered its estimates for the full fiscal year amid the global downturn.
"We expect weak consumer spending to be a meaningful headwind for the foreseeable future," Dickson Chief Operating Officer Roger Farah said in a statement.
No one at the company was immediately available for additional comment.
Investment bank Goldman Sachs noted in a report that luxury retailers have suffered in recent months, and Polo Ralph Lauren may be the next in a string of stores that includes Tiffany & Co, Coach Inc and Nordstrom Inc.
"While Ralph Lauren's brand equity has typically enabled it to remain relatively unscathed in prior discounting periods, today's shift from aspirational to desperational spending has likely impacted the brand," said Sachs, which lists shares of Polo Ralph Lauren as "sell".
Dickson Concepts said in December that it will tightly control inventory and costs as the credit crisis had caused "significant damage" to consumer spending.
Local Harvey Nichols department stores have been promoting sales with aggressive discounts over the past six months, but shoppers remain scarce.
The Hong Kong-based Dickson Concepts said it will continue the further development of its other luxury brand-name businesses such as Brooks Brothers and Tommy Hilfiger, as well as its Seibu and Harvey Nichols department stores.
Moreover, Dickson will continue to seek new brands to add to its portfolio, it said in a statement.
