Gap Gets Off to a Rough Start in 2014

March sales figures are in and Gap is looking worse for wear as foot traffic in America's malls slowly dries up.

Apr 11, 2014 at 12:09PM

When the market opened this morning, Gap (NYSE:GPS) fell back below its Jan. 1, 2014, price. Last night, the company announced its March sales results -- they were not good. Comparable sales at all three major brands -- Gap, Old Navy, and Banana Republic -- fell compared to March 2013. That follows on the heels of a series of falls in February as well, putting Gap in a deep hole for the beginning of its fiscal year.

Until a rough turn in the third quarter last year, things were looking OK for Gap. Comparable sales were broadly on the rise before taking a turn for the worse. So what's going on at Gap that's dragging the business down, and is there an end in sight?

Let's go to the mall
Mall traffic is falling like a woman with her high heel stuck in the escalator -- right on its face. As shoppers move away from malls and those malls shut down, more and more business is moving online. Gap is chasing that shift, offering customers the ability to shop online and pick up in the store. That cuts down on shipping costs, and helps Gap meet its customers where they're actually shopping.

On the other hand, Gap still has over 3,000 largely mall-based stores in its network. Green Street Advisors, a real estate analysis firm, forecasts that 15% of U.S. malls will close or convert in the next decade, while some analysts are calling for even deeper falls.

Gap is trying to cut its dependency on malls, but it's a long road. Last year, online sales jumped 21% but still only accounted for 14% of total sales.

Getting outside of the traditional mall
Retailers who exist outside of the mall have had better success. VF Corp.'s (NYSE:VFC) North Face brand sells through other retail outlets and runs stores largely outside of the mall. In the company's last quarter, North Face managed to increase direct-to-consumer sales by 32%. Even VF wasn't immune, though: The company said that in the U.S. the retail environment for department stores led to weak results last quarter.

Gap's only real non-mall locations are at outlet malls, which are still malls. Gap owns 525 outlet stores globally and is pushing for growth. Those outlets represent an important part of the company's long-term strategy to diversify its channel delivery. Online and outlet are going to be the two keys for Gap as the traditional mall continues to suffer.

Gap still has a lot of strength and even through the weak sales it's managed to keep margins steady with operating margin actually growing to 13.3% last year. The struggle of the failing mall is a struggle that Gap is going to have to confront at some point, and the order online system isn't going to be enough. At some point, the business is going to have to pare down its footprint. For 2014, investors should be looking for sales to at least level out, as the business figures out what it needs to do to thrive over the next decade.

Your credit card may soon be completely worthless
The plastic in your wallet is about to go the way of the typewriter, the VCR, and the 8-track tape player. When it does, a handful of investors could stand to get very rich. You can join them -- but you must act now. An eye-opening new presentation reveals the full story on why your credit card is about to be worthless -- and highlights one little-known company sitting at the epicenter of an earth-shaking movement that could hand early investors the kind of profits we haven't seen since the dot-com days. Click here to watch this stunning video.

Andrew Marder has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers