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Gap, Inc'

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Founded in 1969 in San Francisco ... Abercrombie and Fitch; Limited; Express; American Eagle, etc. Comparing Gap to the competition: ... – PowerPoint PPT presentation

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Title: Gap, Inc'


1
Gap, Inc.
  • (GPS 18.00)
  • Christopher Letts, Kevin Smith, and Brian Burnham

2
Tonights Objectives
  • Overview of GAP Inc.
  • Industry Overview
  • Competition
  • Growth Prospects
  • Concerns
  • Recommendation

3
Company Overview
  • Gap Inc. is one of the largest specialty
    retailers in the world. Gap Inc. operates four
    well known clothing brands.
  • Gap, Banana Republic, Old Navy, Forth Towne
  • Founded in 1969 in San Francisco
  • More than 3,000 Stores worldwide (2800 stores in
    the U.S., 250 Stores in Europe, German, and
    Japan)
  • Mission Gap Inc. is a brand-builder. We create
    emotional connections with customers around the
    world through inspiring product design, unique
    store experiences and compelling marketing.

4
Company Overview
  • Focus on continuing to expand market
  • Forth and Towne brand introduced in 2004
    targeting women over the age of 35
  • Focus on cost control
  • Clothing is made through a 5 phase process
  • Design and Merchandising,Planning and
    Sourcing,Production and Marketing,Distribution,
    Sales and Analysis

5
Company Overview
6
The Competition
  • Large market of retail stores
  • Abercrombie and Fitch Limited Express American
    Eagle, etc.
  • Comparing Gap to the competition
  • Last month all retail sales were down. Gap sales
    were down 3 however comparable stores were down
    6

7
Industry Overview
8
Industry Overview
  • Specialty Retail Stores
  • Very large, Near saturation
  • Retail stores are very abundant in the U.S.
    market place and have experienced slowing sales
    the past couple years

9
Growth Prospects
  • Gap is currently at the lower end of its 52wk
    range.
  • Current Price around 18.00 Target Price 23.50
  • Projected 10 range growth over next several
    years
  • Company has large cash balance
  • Tremendous free cash flow provides the company
    with flexibility regarding its strategic
    long-term options and make the shares compelling
    from a dividend, free cash flow and balance sheet
    perspective.

10
Prospects (contd.)
  • New line still unproven
  • Fourth and Towne line just released targeting
    baby boomer women, ages 35, market untested
  • Should have debt free balance sheet by FY2008
  • Long-term growth should be solid due to expansion
    in international market
  • Five new test stores and 2 Banana Republics being
    opened in Tokyo

11
Prospects (contd.)
  • Management attention to corporate governance and
    social responsibility reduces volatility
  • Gap has continually expanded their brand names
    and target demographics
  • Gap, Baby Gap, Old Navy, Banana Republic, Fourth
    and Townes

12
Negatives
  • Higher Risk (beta 1.84)
  • Operating in Saturated Market
  • Needs meaningful growth to support shares long
    term
  • Rising interest rates have adversely affected
    specialty apparel retailers
  • Industry risks include Fashion, markdowns and
    inventory risk

13
Our Recommendation
  • Recommendation Buy
  • New prospects with Forth and Towne and more
    expansion in the international market will help
    The Gap in their efforts to grow in a fiercely
    competitive environment
  • Gaps balance sheet is saturated with cash
  • Share price is well valued relative to peers
  • Effective management will better position Gap for
    future success and shareholder return
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