BEHIND THE BRAND
THRE’S A STORY BEHIND EVERY NAME.
CHECK THESE OUT:
SELLING TRENDY CLOTHING
IS A LOT MORE DIFFICULT
THAN SELLING MOUTHWASH.
 GAP WAS FOUNDED BY DON FISHER.
HE COULDN’T FIND A PAIR OF JEANS THAT
FIT, SO HE CREATED GAP TO FILL THE…UH,
GAP.
 BANANA REPUBLIC WAS ORIGINALLY
A CATALOGUE RETAILER SELLING
SAFARITHEMED CLOTHING. A REAL
“BANANA REPUBLIC” IS A SMALL
TROPICAL COUNTRY DEPENDENT ON
LIMITED AGRICULTURE
(STEREOTYPICALLY BANANAS, HENCE THE
NAME)
 OLD NAVY WAS NAMED AFTER A BAR
IN PARIS. IT WAS BETTER THAN THE
PREVIOUSLY PROPOSED OPTION
“FORKLIFT.”
chris
Lahiji
GAP INC. IS ONE OF THE LARGER RETAILERS IN
THE UNITED STATES. THE COMPNAY HAS BUILT
ITS BRAND ON CASUAL STYLES. OVER THE
YEARS, IT HAS EXPANDED WITH UPSCALE
BANANA REPUBLIC AND DISCOUNTER OLD
NAVY, AMONG OTHERS. IS IT TIME FOR YOU TO
TRY ON GAP’S STOCK?
98%OF GAP
MERCHANDISE SOLD IN 2006
WAS MADE
OUTSIDE THE U.S.
say what?
DIVIDED:
A distribution of part of company’s earnings.
It’s usually measured in terms of a dollar
amount per share, and can be distributed as
cash, stock (additional shares) on property.
STOCKHOLDERS’ EQUITY
This net worth of a company, or its book value. If you
add all of the company’s assets and subtract their
total liability, you will have the shareholders’ equity.
LIKES
[#1] Customers can use Gap’s new Visa card
in other stores, giving the company access
to data on customer spending. They can use
the inform to tweak their merchandise
toward customer’ needs.
[#2] In 2007, CNBC reported that Gap hired
investment firm Goldman Sachs to assess
the need for big changes, like selling the
company. If purchased, they may get a
premium over the current share price.
[#3] Old Navy is a very valuable business by
itself ( it raked in 48 percent of company net
sales in the second quarter of 2007) and
could be worth a ton if it becomes a spin off.
DISLIKES
[#1]The company is facing massive
competition from specialty stores (Ann
Taylor and Chico’s), newcomers
(Abercrombie & Fitch and American Eagle),
and department stores.
[#4] the founding family still owns more
than 20 percent of the company and has its
best interest in making their investment
grow.
[#2] Comparable-store sales in the second
quarter of 2006 fell 5 percent, and were
down another 5 percent the second quarter
of 2007. Each store is generating less
revenue.
[#5] Gap Inc.’s balance sheet looks amazing
– total STOCKHOLDER EQUITY tops %5 billion
and the company is sitting on over $2 billion
in cash (and cash equivalents).
[#3] Gap Inc. closed down the new store
concept Forth and Towne earlier this year.
Management cannot decide whether to start
over or build on existing brands.
[#4’ I don’t believe new CEO Glenn Murphy
will be able to save Gap. Murphy is the
former CEO of a Canadian drug store –
selling trendy clothing is a lot more difficult
than selling mouthwash.
[#5] Corporate heads have abandoned the
younger set, opting to concentrate of 24- to
34-year-old. This kind of indecisiveness
stunts growth.
Chris’ BOTTOM LINE: A billion-dollar company
may seem impressive, but that doesn’t mean
it’s bulletproof. Watch your step. I don’t
want you falling in that gap.
EDITOR’S NOTE: brass is a quarterly publication, and at such
there could be significant information, new, or price changes
that may differ from resources available at the time this
article was written. All analysis is meant for educational
purposes. You should not make decisions based on
information contained in brass without the advice of a
qualified professional advisor.