Gap Is Still Falling Apart
The market rewarded news that Gap Inc. (NYSE: GPS) will not spin out its Old Navy brand, which has done better than the company’s other divisions. The decision could not hide the fact that Gap’s sales continue to fall and that it has been unable to articulate a solution.
Upon making the announcement, Gap management said, “The company now expects total company fiscal 2019 comparable sales and net sales to both be at the higher end of its previous guidance range of down mid-single digits and down low-single digits.” “Down” continues to be Gap’s situation.
Gap still has to contend with the fact that, in the most recent quarter, Old Navy same-store sales fell 4% from the same period a year earlier. The comparable figure for the Gap brand was 7%. The company’s other large brand, Banana Republic, was down 3%.
Gap has closed hundreds of stores in the past several years to make its operation more efficient. However, nothing could be a tonic like a reverse in the sales fall-offs. It does not help that Gap has a temporary chief executive, Robert Fisher, a member of the company’s founding family.
Gap is another retailer for which getting worse slower is not a solution. No matter how much excitement the new news generated, shares are down 25% this year. The retailer continues to struggle with the fact that, for the time being, it is the industry’s next J.C. Penney.
Gap stock closed at $18.61 a share on Thursday, a gain of almost 4% for the day. The 52-week trading range is $15.11 to $31.39, but the consensus price target is only $16.74.