The Gap Inc. (GPS)’s Boom, And Abercrombie & Fitch Co. (ANF)’s Possible Fall

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The Gap Inc. (NYSE:GPS) was up nearly 5% on a strong sale report released last Friday.  Net sales for the first quarter rose 7%, and net sales for April were up 5%.

Gap has approximately 3,100 company-operated apparel retail stores and 300 franchised stores in 90 countries. The company operates under three main brands: Old Navy, Gap, and Banana Republic. The three brands each operate at different price points. Old Navy offers fun, fashion, and value for the family at great prices. The Gap Inc. (NYSE:GPS) offers classic American styles at an accessible price point. Banana Republic offers modern workplace style at higher price points than the Gap.

Old Navy faces competition from big box store like Target Corporation (NYSE:TGT), a company that has invested heavily in apparel offerings.
The Gap Inc. (NYSE:GPS)The Gap Inc. (NYSE:GPS) also competes with American Eagle Outfitters (NYSE:AEO) for customers at the accessible price point, and Banana Republic’s offering are close in price to Abercrombie & Fitch Co. (NYSE:ANF).

Diving deeper into the sales report, the Gap and Old Navy Brands clearly outperformed Banana Republic.  Gap and Old Navy each saw first-quarter year over year revenue increases of 3%, while Banana Republic was flat for the year.  For the month of April, comparable sales were up 8% at The Gap Inc. (NYSE:GPS), up 9% at Old Navy, and up just 1% at Banana Republic.  The company was clearly experiencing stronger revenue gains in their value and accessible price points.

Abercrombie & Fitch

Abercrombie & Fitch Co. (NYSE:ANF) operates as a specialty retailer of causal apparel for men, women, and kids. The company operates 912 stores in the US and 139 stores internationally, and it operates multiple brands, including Abercrombie & Fitch, Abercrombie Kids, and Hollister.  The company describes its Abercrombie & Fitch lines as, “rooted in East Coast traditions and Ivy League heritage.”

Abercrombie & Fitch Co. (NYSE:ANF) offers premium casual clothing that appeals to customers seeking high fashion and style. Based on the The Gap Inc. (NYSE:GPS)’s sales report and the lack of performance in the Banana Republic brand, Abercrombie’s first quarter could be disappointing. The first quarter has traditionally been the poorest quarter for the company.

If the potential disappointment in revenue was not enough to sour investors, the recent comments by Abercrombie & Fitch Co. (NYSE:ANF)’s CEO should certainly be viewed with concern. Michael Jeffries, the bleached blonde, long-time chief of Abercrombie, recently created a media buzz with his comments on the customers his stores targets :

In every school there are the cool and popular kids, and then there are the not-so-cool kids. Candidly, we go after the cool kids,” Jeffries said. “We go after the attractive all-American kid with a great attitude and a lot of friends. A lot of people don’t belong, and they can’t belong. Are we exclusionary? Absolutely.

The company does not offer women’s sizes above a large and has no intentions of changing the policy. The recent uproar over his comments has even led to a petition asking the company to offer larger sizes.

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