Gap's Troubles Continue

Gap Inc. (San Francisco) reported a September no-less-gloomy than most of its retailing counterparts. For the five-week period ended Oct. 6, 2001 — much of it in the wake of terrorist attacks on New York and the Pentagon — the retailer's sales dropped 7.6 percent and comp-store sales were down 17 percent. Total revenues slipped 7.7 percent.

And the company does not see a corner to turn anytime soon. “At present, we do not see an improvement in comparable-store sales in October from the negative 17 percent experienced to date,” said cfo Heidi Kunz.

“September results significantly missed our expectations, primarily because of Gap and Old Navy,” she said. “About half of our total sales shortfall came in week two of the month, following the tragic events of September 11.”

Year-to-date sales were up 7 percent for the 35 weeks ended Oct. 7, 2000. But that was primarily due to the 18 percent increase in the number of stores it operates. Comp-store sales decreased 11 percent.

Gap seems to be suffering from its spectacular success of the 1990s, which fueled an extensive expansion program. The once-high-flying specialty store operator had made retailing history in the decade with its reimaging of Banana Republic, its creative approach to discount merchandising with Old Navy and its clever intermingling of TV, Internet and stores – particularly its Swing Dancers ad campaign. In the process, it grew its empire to a chain of more than 4000 stores. In the last year alone, it has added more than 600 stores.

“Regarding store growth, as we have previously indicated, we plan to be very selective in the deals we approve,” Kunz said. “Right now, we believe that square footage growth for 2002 will more likely fall in the 5-7 percent range versus our previous target of 10 percent.”