The Gap Inc.

When I first thought bout what company I would like to research, I look down and

fixed the collar on my shirt. Then it dawned on me that since I love fashion, I could do

it on the gap. Who had the power (and the clothes) to make the NYSE take its first casual

Friday? The Gap -- the ubiquitous clothing retailer that runs over 3,300 stores, mostly in

the US, but also in Canada, France, Germany, Japan, and the UK. Its flagship Gap stores

offer a wide variety of men's and women's casual clothing (T-shirts, jeans, khakis). The

company's other chains include Banana Republic, GapKids, babyGap, and its fastest

growing, Old Navy. Each chain also has an online incarnation. The Gap is adding

GapBody intimate apparel stores and restaurants in flagship Old Navy stores. All Gap

clothing is private-label merchandise made specifically for the company. The founding

Fisher family owns about 34% of the company.

Considering that Gap is a designer brand, its competitors would also be designer names

in fashion. Some competitors are American Eagle, Spiegel, and Abercrombie and Fitch.

The article, “Gap Mishap--But Still Deserves a Look,” by Lee Clifford, states that the

Gap and its subsidiaries make up some 5% of all the clothes bought in the United States

and it goes on to say that eventually that number will jump to 8%. For right now,

however, the Gap is going through some tough times. The San-Francisco based company

missed its earnings projections for both the first and second quarters this year and scaled

back expectations for the rest of 2000. Store sales in August fell 14%, causing the stock

to go down 52% to date. Dan Prislin, the CEO, “These are growing pain, not red flags.”

Most all of the damage is coming at the expense of Old Navy. It has been labeled,

“problem child,” by Prislin. Advertising campaigns were botched and sells have been

suffering because of the merchandise they are putting out.

However, there is some good news coming out of the Gap camp. It is poised to

capitalize on the huge business-casual trend. Old Navy, which is gearing up to reach out

to the 25-plus crowd, has incorporated a more sophisticated line of work clothes for men

and women. The company is staying on top of the new-store openings. This year alone it

will have added up 700 new locations.

The article offers one piece of advice, that the stock is extremely cheap right now, and

if you are willing to hang in there through this little rough spot for Gap it will one day the

returns will be great. So don’t give up on the Gap.

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