LOS ANGELES — It’s not all bad news for Gap. Its innerwear concept, GapBody, could become a billion-dollar business, thanks to some noticeable strides this year, according to analysts familiar with the division.Gap Inc., which includes Gap stores domestic and international, and the Banana Republic and Old Navy divisions, was a $13.8 billion company at the end of fiscal year 2001. Gap domestic reported $5.2 billion in sales last year. The company does not break out the financial performance of GapBody or any of its other divisions.Confidence in GapBody, now in 153 locations including its own freestanding stores, comes six months after the arrival of Barbara Wambach as executive vice president of GapBody. During her tenure, Wambach and her team have refined the concept with a stronger emphasis on women, launched GapBody’s first print advertising campaign in April, and pushed for the construction of 2,000-square-foot stand-alone sites.The changes at GapBody, which bowed in 1998, are only the beginning, analysts believe. "It has a great opportunity to be a national chain," noted Richard Jaffe, retail analyst at UBS Warburg. "I’m convinced they’ll be a billion-dollar business, ultimately." That would still trail Victoria’s Secret’s $3.3 billion in sales. But it could certainly pose a threat to department stores’ innerwear business, say analysts, since that segment is considered the most vulnerable to an outside basic lingerie concept.A big caveat, of course, is whether Gap corporate, suffering from 27 straight months of same-store sales declines, can get its act together. As reported, the once-invincible retailer strayed away from basic items in recent seasons in favor of young fashion, thereby alienating its core customer. Gap has spent much of this year trying to get that shopper back — but not without some casualties along the way, including the resignation announcement in May of chief executive Millard "Mickey" Drexler, who has headed the San Francisco-based company for nearly 20 years. He will depart when a successor is found.Wambach declined to be interviewed for this story.A company spokeswoman, however, said Gap’s plan to add 70 to 75 stores during fiscal year 2002 will include some GapBody concepts. No word, though, on a specific number.Because Gap is in a troubled state, observers posit any major growth in the division could be limited for now. More immediate is product expansion. The bra category has expanded to 10 fits from its five core styles, including a basic bra without underwire, a smooth style, a convertible and the stretch lace model. This summer, a low-cut T-shirt bra with a racer back was introduced.The core color palette is as basic as its styles: white, black, gray and neutral tones. But there are signs of playfulness, including a Hawaiian floral print in blue and white, pink and olive, and pink and red combinations.Bra sales are traditionally a cash cow, even in tough economic times, and industry watchers believe the innerwear category could help Gap regain a foothold in the day-to-day full-price arena."They’re coming up with some pretty innovative stuff," said Jennifer Black, analyst at Wells Fargo Van Kasper, noting the chain’s focus on specific technologies. "They need to go narrow and deep in their assortment and I think they could have a great opportunity for holiday this year."Stretch, seamless long and short sleeve T-shirts, camis and tanks are knitted on a cylinder to eliminate side seams. The idea is to create sheer and lightweight items that rest smoothly on the skin. A stamped label on the back of the garments have replaced sewn-in labels or tags.Another standout in stores has been a nylon and spandex bra, without underwire, retailing for $34 with a matching panty at $19.50. The fabric feels like a paper-thin wet suit and hugs the body. Analysts say Wambach is hitting Gap’s customer in the right place, with fewer trend-driven products than Victoria’s Secret that are also a little hipper than what traditional department stores offer. "My suspicion is they’re trying to take consumers from department stores, because that’s not Victoria’s Secret’s biggest business," noted Liz Pierce, a retail analyst at Wedbush Morgan Securities.Dorothy Lakner, an analyst at CIBC World Markets Corporation, concurred, noting GapBody could succeed in wooing department store shoppers, "even though women tend to be extremely loyal in the foundations business."Most said the GapBody print campaign — currently running in such magazines as Vanity Fair, Lucky, Self and others — is communicating fairly well to customers. In contrast to Victoria’s Secret’s hyper-sexual aesthetic, GapBody ads feature fresh, almost wholesome models in their cotton-blend basics. The most recent showcases a trio of girlfriends, each in a basic bra and panty shown with Gap jean jackets."The ads tell the Gap brand story," said Lakner. "Relative to a Victoria’s Secret ad, there is a very simple basic approach of what Gap is trying to do."Product aside, what is resonating with consumers is price. Starting at $6.99 retail for a panty to $48 for a terry robe, the price points are attractive to customers like McKenzie Satterthwaite of Los Angeles, a 20-something mother. "I like simple and basic, and the prices are great," she said last week at the new GapBody store here at The Grove shopping complex next to Farmer’s Market.That said, the heavy markdowns that have become signature to the Gap appear to also be frequent features at GapBody in recent months. "If it’s $36 for a bra, I probably wouldn’t pay. But if they’re having a good sale, I’ll buy it," said Satterthwaite, adding she has purchased product at full price.The same way a drowning 300-pound man could pull down a fit lifeguard, unless Gap resolves the productivity of its core business, the future is not so bright for GapBody, said analysts.Many, like Kurt Barnard, president of Barnard’s Retail Consulting Group and Trend Report, worry that Gap "is in the process of gradually, slowly, agonizingly petering out."What’s more, GapBody is not the life preserver that is going to completely make or break the company’s survival. The concept is simply not large enough to effectively change the performance of Gap, said CIBC’s Lakner. "Fixing Gap domestic is far more significant."

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