GAP SOFT, BUT OUT OF ABYSS

Byline: Jennifer Weitzman

NEW YORK — Although some analysts are expecting Gap Inc. to report a near double-digit same-store decline for January, the numbers may not be as bad as they appear.
On a conference call to preview January same-store sales, softline retail analyst Maura Hunter Byrne of Salomon Smith Barney said the biggest comp decline will come from Gap’s Old Navy division, down between 18 and 20 percent against a 24 to 26 percent increase. She said Old Navy had neither the strong fashion position nor runaway core items it had in January 2000. Banana Republic same-store sales are expected to be flat with Gap, both domestic and international, down 4 to 6 percent. Gap will report results on Thursday.
Not all of the news from January will be disappointing. The company cleared through much of its extra holiday merchandise when it held promotions in December, rather than promoting its merchandise in January. That reduced inventory and comps for the month, but should help subsequent margins. Also, Byrne noted, recent declines need to be viewed through the prism of large increases against which Gap is being measured.
Gap reported an 11 percent comp gain for January 2000, but its comps have been receding since May, hitting their nadir with August’s 14 percent decline. Although January is a far less critical sales month, expectations for it parallel Gap’s performance in December, when comps fell 6 percent after a 5 percent increase in December 1999.
In a separate development Monday, Gap promoted Amy Schoening to the new post of chief marketing officer of the corporation, reporting to president and chief executive officer Millard Drexler. Schoening had been executive vice president of marketing for the Banana Republic division. Her promotion adds a third divisional marketing vacancy at the company, but a company spokesman said the Gap and Old Navy vacancies will be filled before Schoening’s successor is appointed.
Generally, she said that “January sales should meet or solidly exceed reduced expectations.” Salomon’s index of softline retailers is expected to fall 1 to 3 percent for January versus a 7 percent gain for January 2000.
Dennis Van Zelfden with Robinson-Humphrey said he expects Gap comps in the 5 to 10 percent range. He said “by doing what they do best — moving back to its strength of delivering the basics to its core customers,” Gap should expect to see a turnaround during the second half.
Marcia Aaron with Deutsche Banc Alex.Brown said she is concerned her call for a 4 percent drop in Gap’s comps will fall short of actual declines due to the company’s combination of aggressive markdowns, lackluster fashions and tough comparisons.

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