Gap Inc. (NYSE: GPS) has now become J.C. Penney Co. Inc. (NYSE: JCP) in 2012, when J.C. Penney’s revenue fell 25% year over year. Same-store sales dropped by roughly the same amount, and J.C. Penney teetered toward extinction. Gap just announced same-stores sales dropped 8% in November. Sales at the namesake Gap stores dropped 4%, compared with November of 2014, whiles sales at Banana Republic and Old Navy stores dropped 19% and 9%, respectively.
The overall brick-and-mortar environment is worse now than in 2012. ShopperTrak reported physical store sales fell 10.4% over the four-day Thanksgiving weekend to $20.3 billion. Gap’s stores operate in a retail world in which same-store sales have to rise for a national retailer to come close to gaining ground.
Traditional retailers have become desperate, which means they will go to risky lengths to hold holiday sales levels from last year. Most have given up chasing growth. Even the largest retailers, which include big-box Wal-Mart Stores Inc. (NYSE: WMT) and Target Corp. (NYSE: TGT) and department stores like Macy’s Inc. (NYSE: M), have forecast grim holidays. Large niche retailers like electronics company Best Buy Co. Inc. (NYSE: BBY) won’t do any better. Gap has already lowered its full-year earnings guidance.
Amazon.com Inc. (NASDAQ: AMZN) is at the top of the list of traditional retailer challenges. It has forecast revenue increases as high as 20% to $35 billion. Old-line retailers have no chance to approach this number. Their e-commerce businesses are too small. They cannot make up for the hole made by battered store sales.
Gap’s chief financial officer said in Thursday’s announcement:
With much of the holiday season still ahead, our teams remain focused on strong execution and delivering compelling experiences for customers across our brands.
That will not do the trick.
Gap’s shares traded down about 2% shortly after Friday’s opening bell, at $25.60 in a 52-week range of $24.70 to $43.90. The consensus price target for the stock is $27.35. Year to date, Gap shares are down almost 40%.
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