Many retailers are rethinking, or shutting down, ancillary concepts as the recession clamps down on consumer spending. So it's pretty shocking to hear rumblings that Gap (NYSE:GPS) is trying out a new concept.
According to Women's Wear Daily, Gap is opening an accessory concept called Edition by Banana Republic. A prototype store has apparently opened in Gap's home city of San Francisco. The concept is targeting a slightly more downscale price point -- 80% of the merchandise in the store is tagged at less than $100.
This announcement is somewhat shocking, since Gap still has a lot of turning around to do in its older concepts, especially its still-struggling Old Navy stores. Not too long ago, the retailer watched another new concept go belly-up as it was forced to shut down Forth & Towne.
As Gap looks to open a new brand, many retailers are shutting down concepts. Tiffany (NYSE:TIF) recently decided to give up on its pearl retail concept, Iridesse, and Costco (NASDAQ:COST) is giving up on its Costco Home stores. More recent word suggests that Abercrombie & Fitch (NYSE:ANF) is conducting a strategic review of its Ruehl concept, while Ann Taylor (NYSE:ANN) has decided not to go forward with previous plans to start a concept focused on baby boomer women. I'd say these retailers are being prudent.
Gap has never been high on my list of retailers to consider investing in; it just hasn't really been able to turn around its concepts and lure shoppers back into its doors. What little progress it has made seems to be related to cutting costs, rather than becoming an exciting and vibrant retailer again.
Starting a new concept amid shrinking consumer spending not only seems foolhardy, but also sounds like a distraction that this company's management doesn't need. Gap has so much more to accomplish with its existing brands.
One thing Gap does have going for it is a large stash of cash ($1.7 billion) and virtually no debt, which gives it a survival edge against many of its debt-ridden rivals. However, I think Gap's shareholders would be better served if it could turn around the concepts it already has, rather than try to start new ones.
Shop around for some related Foolishness:
- The recent rally means investors should beware retail stocks gone wild.
- Investors should mind the ever-widening Gap.
- Fool Rick Munarriz rips into Gap and others.
