Sometimes, I wonder whether the headline writers out there need to have their heads examined. Case in point: the reporting on same-store sales numbers for Gap
The tale of the tape shows the following: Total retail sales rose 7%, and same-store sales increased 1%. One percent?
I mean, honestly. Does 1% really qualify as "up?"
Well, maybe we should cut Gap some slack. Last year at this time, things were definitely down, at a negative 7%. But I'm still pretty worried about the muck that seems to be gumming Gap's wheels. Banana Republic lost ground, Old Navy was flat, and U.S. Gap was up a slim 3%. International tossed in a 7% gain, but how much of that is real gain and how much is currency?
By way of comparison, Abercrombie & Fitch
The message here is clear. Shoppers are fine with opening their wallets. They're just not inclined to do it in Gap stores.
For the fourth quarter, Gap's total revenues decreased 2% over last year's period, with a 6% drop in comps. That's not so good.
I still think Gap is a turnaround that's not turning around. I believe the split by price -- cheap Gap (Old Navy), regular Gap (Gap), and Gougin' Gap (Banana) -- no longer fits with the tighter "aspirational" ethos that competitors have brought to retail. And it explains, I think, why competitors are absolutely flogging Gap. Gap, I believe, is not going anywhere without some serious thinking about a major overhaul, identifying specific demographic markets, narrowing further by fashion, and then cutting out the generality.
That said, I do wonder whether shares aren't worth a nibble. The balance sheet is OK, and free cash flow will likely be fine, although I'll need to see what's gone on in Q4 before I make a final judgment there. I think Gap's board will have to bring in a management team that can shake things up, but the question here is whether an investment here pays off.
I'm inclined to think we see a pretty firm bottom at Gap, and stocks in turnaround mode often move up while we're biting our nails about the bad that's already priced in. If things don't look terminal following the Q4 numbers, I just might pick up some shares myself. After all, there are few things tougher than missing a bargain because you failed to buy before it was too late.
Seth Jayson knows Gap is in trouble, because he's cheap and unfashionable and Gap is where he shops. At the time of publication, he had shares of American Eagle and Aeropostale but no position in any other company mentioned. View his stock holdings and Fool profile here . Fool rules are here .