Blog: Leonie BarrieGap gossip

Leonie Barrie | 5 January 2007

The disappointing December sales results posted by Gap Inc yesterday have given rise to all sorts of speculation about the retailer’s future. There are suggestions that a takeover bid might be imminent, or that plans are afoot for a management shake-up to oust its chief executive officer Paul Pressler. Whether there’s any truth in these rumours remains to be seen, but there’s no doubt that investors’ patience must be wearing thin after years of eroding sales, slowing footfall, poor merchandise, executive departures, and promises that its newly revamped stores and ranges will spur financial improvements.

On the back of its poor performance in December, Gap has now admitted it is reviewing strategies at its Gap and Old Navy brands. Old Navy would seem to be particularly vulnerable since it sits at the cheaper basics end of the market and goes head-to-head with Wal Mart, Target, Kohl’s, JC Penney and others. Gap on the other hand has lost its shoppers to chains such as Abercrombie & Fitch and American Eagle Outfitters but attempts to make its clothes more fashionable have been criticised for confusing customers.

Will a review of the business be enough or is a more radical change the answer? Analysts contacted by Associated Press seem to suggest that a private equity firm might be willing to buy Gap for about $20bn and then bring in new management. And Patricia Edwards, a fund manager at Wentworth, Hauser and Violich, told Reuters: “There is talent out there that can turn around that company. However, it’s out there, not in there.”

Gap strategies under review


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