I'm pretty sure most Gap (NYSE:GPS) shareholders are really hoping for some innovation from the retailer as it tries to get itself back on track. I wonder whether a new Gap Visa card, provided by General Electric's (NYSE:GE) Money division, is quite what they were expecting.
The interesting thing about this Gap-branded Visa card is that customers will be able to rack up rewards at Gap, Old Navy, and Banana Republic, even though they will be able to use this particular card at other retailers as well. It certainly makes sense that racking up rewards -- a popular way credit card companies have sweetened the deal for the many consumers who are more than willing to make purchases on credit -- could help drive some sales in Gap's sales concepts. (Gap will also continue to offer its private-label Gap credit card, for use only in its stores.)
Also interesting is the fact that through this new card, Gap will be able to access data on how and where customers are spending (using that piece of plastic, at least). Although some of the lessons may be painful, they might bring up some good questions. For example: Do Gap's intended customers really prefer Abercrombie & Fitch (NYSE:ANF) or American Eagle Outfitters (NYSE:AEO), or do they veer even older, frequenting retailers like Ann Taylor (NYSE:ANN) or Chico's (NYSE:CHS)? It seems likely that that kind of competitive intelligence may help Gap tweak its own merchandise assortment to better suit its customers' tastes, or maybe further define who its best customers are.
Of course, its merchandise assortment has been a big part of Gap's problem here lately. The retailer hasn't seemed to know who its customers are or what they want for quite some time, and now that Gap has decided what age group to focus on -- last I heard, it was the 24- to 34-year-old demographic -- some investors might very well wonder if Gap's proclaimed "sweet spot" of people in their late 20s is a bit off the mark as well.
Anybody who's followed my coverage of Gap over the last couple years probably isn't surprised to hear this retail stock still isn't on my investment wish list; trading at 22 times trailing earnings sounds awfully rich when there have been few signs it's luring customers back into stores or regaining (or properly realigning) its identity. After all, Gap's earnings growth has been decreasing for the past several years, and even this year analysts expect Gap's earnings per share to decrease by another 6.4%. However, while this new and innovative credit card may not be quite what investors had in mind for Gap to get back on track, if the competitive data it yields is used intelligently, it certainly could help give Gap an edge as it attempts to better hone its wares for shoppers.
Catch up on some other articles related to Gap, from our Foolish archives:
- Gap's got some green initiatives going on that you might not be aware of.
- Last quarter, it felt like same story, different day at Gap.
- In April, I wasn't sure designer white shirts could do much for Gap.
Gap has been recommended by Motley Fool Stock Advisor and Motley Fool Inside Value. American Eagle Outfitters is also a Motley Fool Stock Advisor pick.
Alyce Lomax does not own shares of any of the companies mentioned. The Fool's disclosure policy reminds you that in the mid-'90s film Reality Bites, Janeane Garofalo's character worked at The Gap.
