Editor's note: This story has been updated to differentiate between Gap Direct and Gap Business Direct. The Fool regrets the error.
On the heels of yet another disappointing quarter at Gap (NYSE:GPS), the retailer has come up with another initiative that it hopes will drum up sales growth -- one that some of us might find dubious. Last week, the retailer said it plans to peddle shoes in the online environment by this year's holiday season.
Gap's plan to open up this online store (featuring "dozens" of footwear brands, the company says) has some compelling statistics to back it up. Gap cited Forrester Research in its press release; the research firm says that the online footwear segment is growing by 15% per year, and it projects that the space will be a $5.5 billion market by 2010.
Furthermore, Motley Fool Stock Advisor and Motley Fool Inside Value recommendation Gap reports that two-thirds of its online customers have said they would buy shoes online. It said its "sizeable" customer base already buys shoes online.
Gap doesn't break out sales data for its online segment -- known as Gap Direct -- in its Form 10-K, although it does do so in its annual report to shareholders. According to the annual report, online sales for the Gap Direct segment reached $595 million in 2005. (Don't let the mention of Gap Business Direct in the Form 10-K confuse you, as it did me.)
Pondering Gap's online presence still further, I recall its Web site overhaul last fall. Instead of providing a seamless transition, it instead chose to sporadically shut out some online shoppers. One can only hope that it will provide a better experience with the shoe-store launch.
These days, skepticism is high when it comes to Gap's plans to heat up sales and lure fickle customers back. I've been wondering whether Gap's brand has simply seen better days -- that was one of my major arguments in this recent Foolish duel. Meanwhile, it's got plenty of competition for the younger set -- from names like Abercrombie & Fitch (NYSE:ANF) and American Eagle Outfitters (NASDAQ:AEOS) -- as well as for the older females it would like to address with Forth & Towne, from such stalwarts as Chico's (NYSE:CHS), Ann Taylor (NYSE:ANN), and Talbots (NYSE:TLB).
It stands to reason that Gap's pretty eager to prove it can stimulate growth again, but given that buying shoes is often a tactile experience (in my opinion, there's nothing worse than an uncomfortable pair of shoes), this particular initiative doesn't seem like a sure thing. Further information about specific brands Gap's online shoe store will carry might give us more to like about the plan -- all we can glean from the related press release is that the shoes will be casual and designer brands. Gap investors can only hope that this initiative puts Gap's best foot forward -- and that the company doesn't end up with its foot in its mouth instead.
For more on Gap, see the following Foolish content:
- See Gap's most recent earnings, as well as a close look at the numbers.
- We recently staged a Foolish duel regarding Gap.
- Last quarter's earnings at Gap: same-old, same-old.
Gap has done enough things right in the past to merit recommendations in two of our investing newsletters. See what else the Fool has picked -- try out any of our newsletters free for 30 days.
Alyce Lomax does not own shares of any of the companies mentioned.
