NEW YORK -- Just over a year ago, The Gap's advertising and merchandising was all about denim and its attendant basics such as T-shirts and chambray shirts. But in the last year, the San Francisco-based specialty store chain has moved into uncharted...
NEW YORK -- Just over a year ago, The Gap's advertising and merchandising was all about denim and its attendant basics such as T-shirts and chambray shirts. But in the last year, the San Francisco-based specialty store chain has moved into uncharted waters. Now, knit dresses and khaki separates fill space once reserved for chambray shirts and denim shorts.
It's a move that's had major impact. The Gap's earnings jumped 53 percent in the last quarter, hitting $63.5 million, up from $41.5 million the previous year. And chairman and chief executive officer Donald G. Fisher readily attributes the strong performance to fashion merchandise, particularly in the women's categories.
The question now is: Has The Gap sacrificed its denim dominance?
"You are correct in saying that we've shifted our focus to fashion in our advertising, but our denim is still very strong," said a spokesman for the company. "We're just letting our customer know that we also carry fashion."
Beyond that, the company declined to comment. However, some observers of the denim scene agree that branching out is no threat to the core business. Thomas H. Tashjian, First Manhattan Co., thinks The Gap recognizes some basic changes in consumer demand, particularly in the women's area.
"We are seeing an environment that's moving away from denim and the basics and looking for fashion. But I think denim continues to be one of The Gap's main flows of merchandise," he said. "There are select times such as late spring and back-to-school when it's just phenomenal."
Dick Gilbert, president of Zena, said he thought The Gap probably would hang onto its customer, mostly because name recognition is so strong.
"I don't think they are going to sacrifice anything," he said. "The Gap brand is so established. And the advertising -- it's like Calvin Klein's advertising, where one ad sells all the categories, whether it's for Obsession or jeans. Just because The Gap is advertising fashion doesn't mean people are going to forget they sell jeans."
Nonetheless, there are plenty of players poised to pounce if a Gap denim gap develops.
Levi Strauss & Co., for one. Robert D. Haas, the firm's chairman and chief executive officer, notes that his women's denim business has been experiencing "explosive" growth over the last two or three years, with no signs of slowing down. And Danny Gladstone, president of CK Calvin Klein, predicts that the jeans market "will become a battle zone" now that the Fruit of the Loom deal looks like a go. "I can't speak for The Gap moving away from denim, but we're going to take a shot at their business. We're coming out with a $45 name jean which I think people will buy before a $38 Gap brand jean."On the retail front, Gladstone added that he thinks the junior chain store Merry-Go-Round is positioning itself to become a "very important player" in the world of denim retailers.
Another top contender could be County Seat, a Dallas-based chain of about 650 stores featuring various lines of jeans and related apparel.
"Denim is all they do," said Gilbert. "For instance, even though everybody else has totally booked up shorts, County Seat still has a large percentage of jeans -- so they're selling a hell of a lot of blue jeans."
The County Seat did not return calls for comment, and there are rumors in the market that the chain is looking to file a public offering this year.
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