By and  on May 2, 2006

Analyst Sees Long Road Ahead for Gap Turnaround
NEW YORK — Looks like Gap Inc.’s turnaround may have to wait.

Mark Montagna, vice president of specialty retail at C.L. King & Associates, initiated coverage on Gap Inc. with an “underperform” rating and a 12-month target price of $15, and said in his report that “Gap is trying to condition investors to expect a second-half [2006] miss.”

“Our rating is based on seeing an investment in Gap as dead money and our belief that the company is in the midst of a multiyear downhill slide,” Montagna said. The retailer could not be reached for comment. Shares of Gap closed Tuesday down 0.7 percent at $18.02.

The analyst said Gap’s brands are facing “commoditization” in the market, and that its store base has grown just 2 percent since 2001 in comparison to a 40 percent increase in stores from Gap’s closest competitors. Also topping Montagna’s list of negatives plaguing the retailer is “an abundance of management changes” and “increased speculation of [chief executive officer Paul] Pressler’s departure.”

The analyst is projecting fiscal year 2006 and 2007 earnings per share at Gap to be $1.17. But he expects net income to decline “by $20 million to $973 million.”


NorthPark Center Revamped and Open For Business
DALLAS — NorthPark Center here is ready to raise the curtain on a $225 million expansion that is intended to make it the dominant mall in the highly competitive North Texas market.

The revamped space, featuring gargantuan works of art by Claes Oldenbuerg and Mark di Suvero, Barneys New York, stores, restaurants and a 15-screen AMC movie theater, opens on Friday.

Along with the 88,000-square-foot Barneys flagship, Martin + Osa, a new division of American Eagle Outfitters targeting shoppers ages 25 to 40, plans one of its first five units here in August. Sephora, a longtime tenant, is building a bigger store connected to a Klinger Advanced Aesthetics spa in the first example of the companies’ new partnership. And Nordstrom, which opened in November in the first phase of the mall’s two-year expansion, is a prototype with a new layout and fixtures.A two-level corridor targets youth in an attempt to redress a weakness. Running between Foley’s and Nordstrom, it has dozens of stores to dress and amuse babies through teens, including Hanna Andersson, Janie and Jack, Build-A-Bear Workshop, Jacadi, Gymboree, PacSun, Hollister, Skechers, Swatch, Urban Outfitters, XXI, Aéropostale, and American Eagle Outfitters, among others. Yet to open are Play Planet Funk, BabyStyle, Puzzle Zoo, Oakley and GameStop.

Nancy A. Nasher, co-owner of the mall with her husband, David J. Haemisegger, said the goal was to lure “the best of the best” in retail, plus emerging concepts. CrewCuts, J. Crew’s new children’s line, will introduce its first freestanding store on Tuesday.

“We will have the best tenant mix and merchandise mix, and that will set us apart,” Haemisegger said.


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