Entering text into the input field will update the search result below

Gap: Leveraging Cash Cows And Future Stars To Stay Ahead

May 03, 2018 6:28 PM ETThe Gap, Inc. (GPS)LULU2 Comments
Matthew McLaughlin profile picture
Matthew McLaughlin


  • Gap Inc. has been able to survive the retail onslaught in recent years through investing in its best sellers and cutting out the under performers.
  • While retailers across the country close hundreds of stores each year, Gap has increased its store presence while maintaining growth.
  • Old Navy and Athleta balance each other to create both consistent and aggressive growth.

For traditional retailers, there have been a number of issues that have resulted in decreased foot traffic, sluggish sales, and store closings. At high end retail stores including Nordstrom (JWN) and Neiman Marcus, consumers have lost the desire to pay price premiums for luxury goods that can be found elsewhere for much cheaper. It's evident in the regression in financials for Nordstrom that consumers just aren't buying into the luxury department model anymore. EBITDA growth for Nordstrom has sputtered as the department store struggles to find new ways to draw in customers to its selection of luxury products.

Gap, Inc. (NYSE:GPS) has never seemed like a very sexy business. Most consumers know of Gap for its Old Navy Brand, a clothing and accessories company that sells relatively inexpensive goods and has been the main driver of revenue for Gap. However, it also owns notable subsidiaries including Banana Republic and the fast growing Athleta. Many retailers have faced poor performance from racking up excessive debt, opening stores in areas with low foot traffic, and a lack of competitive marketing. However, Gap has stuck to a simple strategy of monitoring and cutting out under performers, placing stores in areas with high foot traffic, and sticking to its core business of offering value and quality products to its customers. There are several areas of Gap that make it a long term play for the next 12 months going forward.

Investing in the Winners, Cutting out the Losers

Gap's best selling brand continues to be the Old Navy line, and Gap plans to open 60 more Old Navy locations in North America and will reinvest in its current locations through store renovations throughout the year. At the same time Gap will also be closing up to 200 of its struggling Banana Republic locations over the

This article was written by

Matthew McLaughlin profile picture
Matthew McLaughlin is a student at Northeastern University studying Finance and Economics. He has consistently followed the markets since he was a freshman in high school and built an interest and understanding of the financial markets. Connect with Matthew here:https://www.linkedin.com/in/mattfmclaughlin/

Analyst’s Disclosure: I/we 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.