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The Gap between losses and profits

Janet Babin May 23, 2008
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The Gap between losses and profits

Janet Babin May 23, 2008
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Scott Jagow: The retail business, as a whole, is also suffering. You know why. But the troubles at Gap started way before gas prices and food prices and all that. Gap just reported sales were down for the 15th straight quarter — but profits were up 40 percent. That’s a little baffling. Let’s check in with Marketplace’s Janet Babin at North Carolina Public Radio.


Janet Babin: So Gap is really three stores: Old Navy, Gap, and Banana Republic. The company’s got a new CEO, and it’s in the midst of a turnaround. Here’s how it made money in the first quarter: it reduced inventory and slashed marketing costs.

But retail sales consultant Howard Davidowitz says the stores are bleeding customers:

Howard Davidowitz: Old Navy has lost about 30 percent of its market share in the last five years. So if Gap keeps going the way it’s going, it’s going away.

Davidowitz says Gap’s losing to more nimble competitors, like Urban Outfitters and J Crew. He says what Gap needs to do is clarify.

Davidowitz: The gap is a little bit of everything. The Gap has to decide who they want to go after and focus their business like a laser beam.

How else can you get a consumer — who just paid 70 bucks to fill up their gas tank — interested in another striped cotton sweater?

I’m Janet Babin for Marketplace.

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