NEW YORK (The Deal) -- For most of its existence, New York-based fashion giant Ralph Lauren (RL - Get Report) has avoided the pitfalls that tripped up many U.S.-based fashion brands by carefully managing its exposure so that revenue and profits increased steadily in step with consumer demand.

Competitors such as Coach (COH), Michael Kors Holdings (KORS) and Tommy Hilfiger at different points in their histories grew too rapidly, over-saturating the market with their goods, consequently losing their exclusivity and thus their appeal to consumers.

Over the same period, adjusted earnings before interest, depreciation, taxes and amortization went to nearly $1.4 billion, from $330 million, according to data provided by Bloomberg.

Debt actually decreased over that time to about $270 million, from close to $430 million, while investors bid up the company's stock, increasing its market capitalization to nearly $15.4 billion, from almost $1.6 billion


FASHION DESIGNER RALPH LAUREN

But by 2013, the relationship between Farah and Chief Executive and Founder Ralph Lauren had soured a bit, pushing Farah into the role of vice chairman and ultimately ending in his departure from the company in May 2014.

The end of Farah's tenure brought an end to Ralph Lauren's winning streak, according to one industry watcher, and the company has struggled in recent months.

After Farah left his roles of president and COO, which were filled by Jackwyn L. Nemerov on Nov. 1, 2013, Ralph Lauren's revenue continued to increase to about $7.6 billion for the fiscal year ended March 28, from about $6.9 billion for the fiscal year ended March 30, 2013. But adjusted EBITDA fell to about $1.35 billion, from nearly $1.39 billion, over the same period, while adjusted net income fared even worse, dropping to about $710 million, from about $770 million.

Investors have responded by punishing the stock, which is trading at about $132 a share, giving the company a market cap of about $11.1 billion, well below the more than $15 billion Ralph Lauren posted near the end of Farah's reign.

Although the company's executive management team has changed, Nemerov remains in place, and Lauren may have too much say in how the company is managed.

Although Lauren is regarded as possessing a great creative mind, he isn't as adept at operations, according to industry observers.

Having strong operations is essential for a company such as Ralph Lauren, because it already offers a wide range of products and has a strong international presence so there are few places to grow and every dollar matters.

And the clothing giant may also need to explore separating some businesses such as its fast-fashion chain Club Monaco, which would shrink the business to a more manageable size, a source said.

That person said that the company considered selling the retailer last year but likely didn't fetch a high enough offer.

Ralph Lauren didn't respond to requests for comment.

Down-sizing the company to focus on higher-end products would reinforce an image of exclusivity that may have been tarnished over time as Ralph Lauren took on more categories and as consumers saw more of the company's products appear at discounters such as TJX's (TJX) T.J. Maxx.

Promotional discounting became problematic for brands such as Coach and Michael Kors Holdings, both of whose stock prices have declined dramatically.

For Ralph Lauren to return to the solid performance that marked the Farah years, the company needs to bring in an executive who can replicate Farah's operating abilities. Otherwise, Ralph Lauren could not only continue to struggle but end up in the same unenviable position of many of its competitors, some of which ultimately had to execute massive restructurings as a result of mismanagement and overexposure.

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