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Not the usual retail Gap

Amy Scott Apr 12, 2007

Not the usual retail Gap

Amy Scott Apr 12, 2007

KAI RYSSDAL: A caveat as we begin. Just as consumers are fickle, so are some of the numbers about consumers.

Retail sales figures spring immediately to mind. March was good, we learned this morning. Overall, sales jumped 6 percent last month, thanks to warm weather and heavy Easter shopping.

Predictions for April really weren’t so hot. Wal-Mart and Federated Department Stores both said they’re not expecting great numbers this time next month. They’re worried higher gas prices and fallout from the subprime mortgage scandal might keep shoppers home.

Gap was having none of that negativity, though. Marketplace’s Amy Scott reports the company may be recovering some of its long-lost luster.

AMY SCOTT: Gap Inc. has been plagued by soaring competition and high staff turnover. Sales have been mostly flat or on the decline for the last several years. So a 6 percent rise in March caught analyst’s attention.

Retail analyst Burt Flickinger says the much-advertised “boyfriend khakis” and a line of clothing that funds aid programs in Africa are helping revive the original Gap brand.

BURT FLICKINGER: Gap is not out of the woods. But at least it’s put out the fire and can start to rebuild the business a bit.

But monthly sales are measured against the same month the previous year. Flickinger says it isn’t hard to improve on last March, when Gap’s sales fell 13 percent.

Analyst Mark Montagna with research firm C.L. King says profit margins actually fell last month.

MARK MONTAGNA: While you get some nice sales, the profit on each of the sales was lower than it was last year. So you may not actually get improved earnings for the month versus last year.

Still, some see glimmers of hope in Gap’s turnaround efforts.

The company’s been closing stores to cut costs and reduce competition between its own brands, which include Old Navy and Banana Republic. Interim CEO Robert Fisher has outlined plans to recruit and retain creative talent.

John Morris follows the company for Wachovia Securities.

JOHN MORRIS: I think we’re going to see the company move from taking two steps back and one step forward, to making two steps forward, and one step back.

But can Gap take the next step to a profit? We’ll find out next month, when the company reports its first-quarter earnings.

In New York, I’m Amy Scott for Marketplace.

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