Fool Fight: Gap vs. J. Crew

Welcome to another Fool Fight. Grab your ringside seat, please.

Our last bout resulted in a decisive victory for Target over Wal-Mart, thanks to several passionate Motley Fool CAPS players. Today, we're at the mall with two angry shoppers. Watch out for sharp elbows.

Tale of the tape
Let's meet our combatants. In the red corner, it's Gap (NYSE: GPS  ) , which broke mirrors in November with a positively hideous 8% drop in same-store sales. That's got Foolish friend Alyce Lomax wondering whether she'd be better off waiting for Godot. Perhaps a dope slap would help? Well, at least this one-time fashionista has Bono.

Meanwhile, in the blue corner, it's J. Crew (NYSE: JCG  ) , which hit its stride in the third quarter. Good timing. J. Crew's balance sheet still needs repair despite a successful summer IPO. Still, one Fool says that the shares are priced for perfection.

Get ready to ruuuuummmmmmble!
Who will take the title? Ding! There's the bell! First out of the corner is J. Crew, with this jab from fraser24gt:

The CEO that brought J. Crew public is the same one that helped The Gap become a powerhouse in retail, including being the mind behind the company's expansions: Banana Republic and Old Navy. [Gap] is awful now, but he left before that happened. I think J. Crew will continue to expand, and their quality clothes will only help.

Gap counters with a flurry of body blows from CAPS all-star cjlee001:

Banana Republic makes very high quality clothing at a reasonable price, and Old Navy is very affordable. Gap is pretty popular at home and has a very good reputation abroad. They should do well internationally, [especially] in emerging markets by selling the "American" look.

And J. Crew is sent reeling! Back on the ropes, the young retailer covers up to protect from Gap's thunderous shots. But then an opening appears, through which Alyce, known as TMFLomax here in Fooldom, delivers a jaw-shattering upper cut:

[Gap's] turnaround has been talked about for ages, but so far (and it's been a few years now), it just hasn't materialized. I fear that its missteps in merchandising have already damaged the brand. Despite the fact that CEO Paul Pressler has been making a hefty salary (including stock option packages), he owns a negligible amount of the company's stock (former board member Meg Whitman owned more shares than he did, as of the company's last proxy statement). I think this retailer is going to have tough times for a while; it has lost a lot of ground with consumers. I don't see a turnaround anytime soon.

Down goes Gap! Down goes Gap! Bruised and battered, the wobbly-kneed battler heads back to the center of the ring for one last combination, thanks to all-star player Khilith:

The Gap has been in the doldrums for a few years now. Fashion is a fickle industry, and attitudes can change quickly. The recent introduction of their new Skinny Black Pant marketing appears to have been a Good Thing (tm) for The Gap.

Let's go to the scorecard
It's a valiant effort, but an overwhelming dose of bearish sentiment results in another vicious knockdown. As J. Crew returns to its corner, the ref begins his count: 1 ... 2 ... 3 ... 4 ... 5 ... 6 ... 7 ... 8 ... 9 ... 10 . you're out! Better bring CEO Pressler a dose of the smelling salts.

Metric

Gap

J. Crew

Total ratings

191

74

Bullish ratings

106

65

Bull ratio

55.5%

87.8%

Bearish ratings

85

9

Bear ratio

44.5%

12.2%

Bullish pitches

20

17

Bearish pitches

30

2

Data current as of Dec. 4, 2006.

Get in the ring!
Will Gap ever get its groove back? Is J. Crew really that good? Or could Urban Outfitters (Nasdaq: URBN  ) beat them both with one hand? Get in the game now and tell us what you think. Or, if you'd rather, choose one of the more than 1,500 stocks that have yet to earn a star rating in CAPS, including health-care provider Horizon Health (Nasdaq: HORC  ) . Click here to rate it. It's entirely free. Your Fool cap is waiting.

Gap is a recommendation ofMotley Fool Stock AdvisorandMotley Fool Inside Value. Take a peek at either service free for 30 days.

Fool contributor Tim Beyers didn't own shares of any of the companies mentioned in this story at the time of publication. Get the skinny on all of Tim's stock holdings by checking his Fool profile. The Motley Fool's disclosure policy is always in fighting shape.


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