The Gap Gets Whacked, Down 17%

May 20, 2011
J. Webster
Comments Off on The Gap Gets Whacked, Down 17%

Gap (GPS) was crushed today, taking a 17% haircut after the company lowered guidance due to cost increases. While other clothing companies can raise prices for their products and consumers will still buy them, that’s usually not the case for The Gap. They are know for their cheap and perhaps trendy clothes, not necessarily the quality. One Yahoo Finance message boarder had this to say, for how The Gap can recover and manage higher cost increases.

LOL maybe GPS can grow own cotton
i know this sounds silly- but think about it-certainly one way to hedge cost

What’s really going on is gas prices have run up, so consumers have less money to spend on t-shirts, pants, and socks that they don’t really need. They have other problems at the Gap, as they fired a top designer as they were unhappy with how she’d been unable to ‘revive’ the brand. Consumers are fickle, and with so many choices out there, it’s tough to stay on top for a long time. Maybe Saturday Night Live can do another skit about the Gap to help boost buzz about the brand again.

This from the Associated Press.

Jeff Black of Citi Investment Research said the quarterly results were more indicative of the problems that Gap is having as opposed to a reflection of issues within the retail sector.

“Ramping inventory with sluggish sales after a multi-year move to lower unit costs and expenses carried risk in the first place. Coupling it with key personnel changes at the divisional and design levels increased the degree of difficulty,” he said.

Black lowered Gap’s price target to $20 from $22 and maintained a “Hold” rating for the company based in San Francisco.

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