Gap's Banana Republic Brand Set To Get A Lift From Mad Men Themed Clothing

| About: The Gap, (GPS)

On Sunday, the season 6 premiere of "Mad Men" posted stellar numbers and fell just shy of an all time record for the show. One retail company could get a lift during the show's spring run, thanks to a new clothing line designed around the main characters.

Banana Republic, owned by Gap (NYSE:GPS), is modeling a line around "Mad Men's" Don and Megan Draper. The couple, played by Jon Hamm and Jessica Pare, are often seen as elegant dressers representing the late 1960s era in business.

Simon Kneen, creative director at Banana Republic, had this to say of the clothing line, "We call it Mad for Mod that Janie has brought to the season, that whole '60s iconic moment." Kneen also said, "We are taking 1967 and making it 2013", when discussing the specifics of the 1967 themed clothing line on the show and in stores.

Season six of "Mad Men" kicked off with 3.4 million viewers on Sunday. This is down slightly from the season five premiere that had 3.54 million viewers. In the key 18-49 age demographic, 1.4 million viewers turned into the premiere, down from last season's 1.6 million.

The new line of "Mad Men" themed clothing could be a big break for Banana Republic. As a member of Gap's brands, Banana Republic is getting lost to bigger units Old Navy and Gap and key growth brand Athleta.

In February, sales at Banana Republic stores dropped 5%. This is in sharp contrast to the prior year, where comparable sales were up 11%. This also marks a surprise drop since comparable sales at Banana Republic stores were up 3% in the fourth quarter and 5% in the fiscal year.

In the fourth quarter, Banana Republic sales increased to $655 million in the United States and $872 million overall. This made up only 18.5% of the $4.73 billion in sales for the company. For the full year, Banana Republic sales made up $2.17 billion in the United States and $2.85 billion overall. This represented 18.1% of total Gap sales. Old Navy and Gap both posted sales above $5.6 billion for the full year, double that of Banana Republic.

During 2012, part of the increase in sales was a result of a previous "Mad Men" themed clothing collection. Banana Republic has found a partnership that works with its retail demographic. Look for the new lineup to help continue the boost in positive same store sales experienced last fiscal year.

At the end of the fourth quarter, there were 3407 total stores under Gap brands. Of that total, 638 company owned and 53 franchised stores represented the Banana Republic brand. This represents 20% of stores and is significantly lower than the 1000 plus stores under the GAP and Old Navy brands.

Banana Republic closed seven stores during the full year after opening eight. This net gain of one isn't promising for the brand. However, continued positive same store sales and a strong demand for "Mad Men" related products could help Gap pick up franchisees to expand the brand in the United States and internationally.

Sales of Gap are closing in on a new fifty two week high. The company trades at 17 times analysts' expected $2.63 in 2014 earnings per share. In 2014, analysts expect earnings per share of $2.92, giving shares a forward price to earnings of 12.7. Two key events are coming up that could highlight Banana Republic's sales and the company as a whole. On April 17th, the company will hold an investor meeting. Gap will also present first quarter earnings on May 15th. This is a retail stock that, like "Mad Men" season six, should be watched.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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