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Excerpt from Barron's Weekly Magazine. Receive all our excerpts by signing up here:

How Gap Can Get Its Groove Back by Robin Goldwyn Blumenthal

Summary: Analysts are negative about Gap Inc. (NYSE:GPS), citing its lack of fashion focus and the difficulties of replacing outgoing CEO Paul Pressler. Since early 2005, the company has seen a steady trend of declining sales. But Robert Olstein, head portfolio manager of the Olstein All-Cap Value Fund, recently began accumulating Gap shares, and says he has the answer to the companies woes. Olstein says Gap needs to perform a McDonald's-like turnaround by closing underperforming stores and freeing up cash to find the clothing customers want. Timothy Kang, an Olstein analyst, says it can easily boost cash-flow from $1 to $1.50/share. The company, which had $2 billion in debt before Pressler took over, now has $1.9 billion to spare. Olstein also has a couple of recommendations about whom to hire to replace Pressler, and says that if all goes well, shares ($19) could hit at least $27 in 12-18 months.
Related Links: The Gap: Private Equity Speculation Continues, Gap: The Short Case, Can Goldman Sachs Help With a Gap Turnaround?

Gap Stores 28 01 2007

Source: How Gap Can Get Itself Back on Track - Barron's