NEW YORK (AdAge.com) -- How much can you squander on a licensed luxury brand gone awry? If you're Polo Ralph Lauren, about $355 million.

The preppy-clothing purveyor paid the vast nine-figure sum in February to buy back its Polo Jeans Co. brand from licensee Jones Apparel Group and, not four months later, said it will discontinue it in the U.S. According to President-Chief Operating Officer Roger Farrah, Polo Jeans Co. had become "rundown a bit, over-promoted and over-distributed."

Moreover, the licensing contract prevented denim doyen Ralph Lauren from becoming a real player in the exploding premium denim category with the designer's other high-end brands.

Rethinking licensing deals

The pricey buyback is a trend, not only for Polo -- which is increasingly limiting its licensing deals to more controllable categories and geographies -- but for many companies that are finding the "price for licensing out their brands from an image standpoint may not be worth all that extra revenue," said Marshal Cohen, NPD Group's chief industry analyst.

Mr. Cohen said Polo "missed the boat" in the premium-denim category, because licensee Jones put more emphasis on Costco than boutiques, where high-end denim is selling best. "When you think of premium denim, you think Ralph Lauren, but yet it's hard to find [the brand] in the upper-end places," he said. "And if anything keeps Ralph up at night, it's that he hasn't exploited premium denim, because he wears it every day."

The jeans-wearer, though, isn't even on the map in the over-$100 denim market, which over the last few years has reached $390 million or 3% of the $13 billion denim market for the year ended in April, according to NPD Group.

New premium denim line

So while the company is shelving the Polo Jeans brand in this country, it is introducing its first premium denim products under the Lauren brand for women and the Polo Ralph Lauren brand for men next year. Polo spokeswoman Nancy Murray said those efforts are just the first steps in a long-term strategy that includes pushing denim through all of Polo's 21 labels, from its hip 20-something Rugby to its high-end vintage Double RL and pricey Purple labels.

"The economics of reacquiring the license was so attractive because we were not taking back a brand; we were taking back a category of business that we weren't really able to design, grow and build," Ms. Murray said.

Polo, which spent $59 million in measured media in 2005, according to TNS Media Intelligence, will most likely spend far more on denim than the $5 million it committed to the Polo Jeans brand last year. Ms. Murray would only say that the company will put "significant resources" against its denim effort, which is handled in-house.

'A bit late in the game'

But even with those resources, is it too late? By all accounts, denim has slowed if not plateaued. McCann Erickson trend analyst Tom Julian said "it's a bit late in the game" for Polo to be entering premium denim, especially as "designer labels don't necessarily constitute success in denim today as much as unexpected labels from unexpected places."

Though NPD data show Hugo Boss ranks second in sales of men's jeans over $100 in department stores, other top names are all recent upstarts, such as Seven for all Mankind, Citizens of Humanity and Lucky, and the same is true for women's jeans at that price point.

But analysts and observers are bullish that the move to discontinue Polo Jeans and grow its denim business with its higher-margin, higher-price-point brands is a sound one. As Goldman Sachs analyst Margaret Mager noted to Mr. Farrah in the Q&A portion of Polo's recent 2006 earnings call, "It's always amazing how you've managed to reinvent yourself, so impressive."

Mr. Cohen said that while Lauren's new denim lines will likely not "make or break" the company, the initiative is about maintaining the brand's prestige. "Why buy the $200 or $400 Polo product when you can buy something with the same brand cachet for $29?" he said. "You have to get rid of the bottom to substantiate the top."