Like my colleague Alyce Lomax, I really wonder about Gap (NYSE:GPS). I wonder whether it's a good place for investors to put their money, and I come down on the "I don't think so" side of the argument. That puts me on the other side of the fence from one of the guys who signs my checks, Fool co-founder Tom Gardner, who recommended it for Motley Fool Stock Advisor.
But mostly I wonder if there isn't an identity gap at Gap. Does Gap know whom it serves? Does Gap know its customers? The less-than-stellar sales trends at the retailer suggest to me that it doesn't, especially compared with peers that have turned on the afterburners, like Chico's FAS (NYSE:CHS), Abercrombie & Fitch (NYSE:ANF), and even American Eagle Outfitters (NASDAQ:AEOS) or Urban Outfitters (NASDAQ:URBN).
I can't help noticing that these success stories have one thing in common, one thing that Gap lacks: a very narrow customer focus. Urban Outfitters has its hippy-ish, not-quite-a-headshop feel, allowing even suburban mallgoers to feel like loft-dwelling hipsters. Chico's knows its core women's market so well that it seems to be succeeding at the peril of almost everyone else in the space, including Ann Taylor (NYSE:ANN). Abercrombie and American Eagle aim squarely at the 15-to-25 crowd, while Hollister (a chunk of Abercrombie) goes for a beachier look in the same demographic. Both A&F and AE are also opening new concepts for the post-25 crowd. And notice, if you will, that these new chains are going to carry different names and entirely different looks.
What's Gap doing? I'm never quite sure. At Gap you've got, what, clothes for everyone from 15 to 40? And at Banana Republic, you've got more expensive clothes for a similar demo -- perhaps shedding some of the low end. And then there's Old Navy, which is similarly broad, but also burdened by a self-conscious, over-the-top neon campiness that's already worn as thin as its bargain togs. There are a handful of new upscale Forth & Towne stores, but they betray their Gapness with some of their merchandise. In short, the company's concepts are mainly differentiated more by price than by style.
As consumers become ever more style-conscious and ever more fragmented, I think that Gap's lack of focus will ensure that these shoppers look elsewhere. Some evidence of this trickles in every time I write about Gap. Some critics claim its clothes are too plain, but as soon as it's colored up a bit, the Chino and bluish-shirt crowd feels slighted and decries the way the store has been turned over the Britney wannabes.
Take a page from your successful competitors, Gap. You've already gotten into the act -- to a degree -- with your female-focused Forth & Towne. Reinvent and realign the rest. How about a Gap Essentials to provide the core, boring Chinos and sweaters that people like me want to get? Add a Gap XY (OK, you can think of a better name) for the younger crowd. And finally, how about a Gap "We're Not in College Anymore" for the 30-somethings?
In other words, get in touch with consumers, Gap. Give them what they crave. And don't live up to your name.
For related Foolishness:
- To judge by last week, Gap's still not getting it done.
- Check out Gap's growth initiatives.
- Or relive disappointments past.
Seth Jayson owns a couple of Gap sweaters, but at the time of publication, he had shares of only American Eagle, and no position in any other company mentioned here. View his stock holdings and Fool profile here. Gap is a Motley Fool Stock Advisor recommendation. Fool rules are here.
