Tumbling Into the Gap?

Despite May's compulsive shopping, June marked the beginning of a decline for many retailers. While many have supposed in recent months that Gap (NYSE: GPS  ) is gearing up for a comeback, today investors got word that the retailer's same-store sales slipped by 5% in July, a rather nasty surprise despite what has turned out to be a rather slow summer for retail.

That category definitely includes Gap. In addition to its same-store sales slip (Wall Street had expected a 0.9% increase), overall sales fell 3% to $1.0 billion. The retailer also delivered a deep cut to its profit guidance, saying it now expects to earn $0.19 to $0.21 per share, as opposed to the previous expectation for $0.28 per share.

Granted, it looks as though July has proven difficult for many retailers. Ann Taylor (NYSE: ANN  ) , which has been on a veritable tear lately, also reported a slip in same-store sales, but it provided some degree of comfort by upping guidance by a penny. (On the other hand, Chico's (NYSE: CHS  ) continued to show off its good fashion sense.)

Seeing how specialty apparel retailers that appeal to a more mature female demographic -- such as Ann Taylor and Chico's -- have done well recently, I can see the power of the niche. These are slightly older women with solid pocketbooks and a desire to be fashionable, not trendy. So, with all the cutthroat competition for teens, it makes sense that Gap is trying to evolve from its past as a teenybopper retailer and appeal to a more general audience.

Several initiatives by Motley Fool Stock Advisor pick Gap point to an eagerness to expand the demographics for its self-titled stores as well as its Old Navy and Banana Republic storefronts. A hip new marketing campaign and a stepped-up plus-size line are meant to woo shoppers, some of which may have been disregarding Gap's portfolio of stores. At the moment, though, one might wonder whether Gap is succeeding.

On the other hand, maybe it's simply that so many shoppers shopped till they dropped in the springtime that they're all shopped out. Maybe that's compounded with the fact that high gas and food prices are eating into discretionary income, or people are worried about their credit card debt with interest rates threatening to rise. (Sound familiar? Our Credit Center can help.)

So, there are lots of reasons pocketbooks could be snapping shut right now, many completely circumstantial. However, such a surprising shortfall in sales numbers as well as drastically reduced profit guidance brings back a question Fool Rick Munarriz has asked before: Is Gap really back?

Tom Gardner likes Gap enough to pick it forMotley Fool Stock Advisor. Find out what other companies he has marked for success. Or, if you'd rather talk about Gap, check out our Gap discussion board.

Alyce Lomax does not own shares of any of the companies mentioned. When shopping, she definitely prefers Ann Taylor to Gap.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 509873, ~/Articles/ArticleHandler.aspx, 10/24/2016 4:55:32 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 2 days ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

12/31/1969 7:00 PM
ANN.DL $0.00 Down +0.00 +0.00%
ANN CAPS Rating: **
CHS $11.96 Up +0.07 +0.59%
Chico's FAS CAPS Rating: **
GPS $26.41 Down -0.07 -0.26%
Gap CAPS Rating: **