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Gap, Inc.

- A Portfolio Analysis

Pradeep Sapkota
Albi Alikaj
Kristina Daily
Sony Byanjankar
Maureen Atieno
Introduction
Leading American specialty apparel retailer
New York State Exchange (GPS)
Figures:
– 150,000 employees
– 3,139 stores
– Brands: Gap, Banana Republic, Old Navy, Piperlime,
Forth & Towne, and others
– Worth: $13.32 billion
History
Established: July, 1969 by Donald and
Doris Fisher in San Francisco State
University selling Levi’s jeans and records
Gradual Increment in net income
Recession in 1970s- company’s reaction
May, 1988- Reincorporated in State of
Delaware
Addition of other members in the portfolio
GAP
Was created in 1969 with the original creation of Gap as
a corporation
It is the parent member in the portfolio
It offers extensive selections of classically styled, high
quality, casual apparel at moderate price points
Products range from wardrobe basics such a denim,
khakis and T-shirts to fashion apparel, accessories,
personal care products for men and women, ages teen
through adult, and maternity apparel.
Gap stores also include GapKids, babyGap, and
GapBody.
GAP (continued)
Gap stores make up more than half of all
Gap, Inc. stores with more than 1800
located in 18 countries.
Gap generated 39 percent of net sales
during 2007
Currently Gap is the second major
segment of Gap, Inc. after Old Navy
Banana Republic
Gap, Inc. acquired Banana Republic in 1983
Initially only carried two stores and safari motif
Today, Banana Republic has 535 stores in North
America and Japan and a Web-Site
Banana Republic products range from apparel, including
intimate apparel to personal care products
Offer sophisticated, fashionable collections of dress-
casual and tailored apparel, shoes and accessories for
men and women at higher price points than Gap.
Target market includes business casual and consumers
that have a sophisticated fashion sense
Mid-scale (not high-dollar, but far from discount) apparel
Banana Republic (cont.)
Like most apparel companies, Banana Republic follows a seasonal
pattern with sales peaking during back to school / work and holiday
periods
Contributions to Gap, Inc. Portfolio:
– In 2007, Banana Republic’s net sales (in millions) were $2,548 in
comparison to Gap, Inc.’s net sales being $15,943, which equals to
about 15.98% of the company as a whole.
– As per 2007’s Annual Report, Banana Republic’s net sales in the United
States were $2,351, Direct online sales were $136, Canada’s sales
were $147 and Asia’s sales were $89 totaling $2,723 (in millions).
– Banana Republic’s net sales (in millions) were $2,723 in comparison to
Gap, Inc.’s net sales of $15,763, which equals to about 17% of the
company as a whole.
– Overall, global sales growth of Banana Republic has continued to
increase. Global sales growth from the previous year was 11%.
Old Navy
Subsidiary of Gap Inc., Old Navy was created in 1994 as
a low-priced retailer by the former CEO Millard Drexler.
At first it was operated under the banner “Gap
Warehouse.” But later on he changed the name as Old
Navy, which was based on the name of the bar in Paris.
Old Navy was created to compete with the low-priced
retailers like Target, Wal-mart, JC Penny, and others.
By the end of 2007, Old Navy has more than 1,000
stores in the United States and Canada.
In 2000, Old Navy started its online store. i.e.
www.oldnavy.com
Old Navy (cont.)
Old Navy’s target market consist of
fashion oriented and yet price conscious
teenagers and adults.
Offers a specialized section for infants,
boys, girls, men, and women.
It also have variety of accessories
including shoes, sunglasses, handbags,
and others.
Old Navy (cont.)
Contribution to Gap Inc.
By the end of 1997, Old Navy has $1.3 billions in
sales, which represented nearly 20% of the Gap
Inc.’ s total revenue.
Old Navy accounted for 16% of the total number of
stores operated by its parent company.
In mid 2000, Old Navy accounted approximately
40% of Gap Inc.’s nearly $16 billion in total
revenue.
As per 2007 annual report, $6.6 billions in sales,
which represented 42% of the Gap Inc.’s total
sales.
Piperlime
Piperlime shoe which is a part of Gap inc. was started in
oct.2006.
The site was officially launched in Nov.2006.
It is an only online store and it only sells shoes.
The shoes are not affiliated with the Gap brand.
The shoes are designed and branded by other
companies.
They started the Piperlime shoe because they found that
most of their shoppers wore shoes from other brands.
It was less risky for them to start the company since they
would benefit from its success in ecommerce.
Piperlime
Piperlime shoe offers an edited selection of designer and casual
brands.
They are able to offer shoes that customers want and they are able
to dress their customers from head to toe.
Celebrity stylists offer tips on the latest fashion trends.
With the growing online shoe sale annually by 15 percent piperlime
has a capability of growing and earning more revenue.
The online sales in the second quarter of 2006 were up 27 percent
because of the new site.
The global growth of piperlime was 56 percent in 2007.
To keep its operations efficient it has a dedicated distribution center
in Grove city, Ohio.
It is headed by the senior vice president of Gap inc.
Employees are buyers from their competitors and Gap veterans.
Managerial Analysis
SWOT Analysis

-Strength: Brand Image, Risk diversity, Strong


supply chain
-Weakness: Limited market, No Fashion
Identity, Over dependence on US, declining
cash flows
-Opportunities: Expansion, E-commerce
-Threats: Competition, Market nature, Tariffs
Managerial Analysis, Contd..
Five forces:
– Competition
– Ease of Entry
– Substitutes
– Strength of suppliers
– Strength of buyers

Distinction Notion
– Brand valued at $6,416 million (2006)
– History
– Old Navy, Gap, Banana Republic, Piperlime
Financial Analysis
Ratio Analysis
– Solvency Ratio
Liquidity ratio: Quick ratio: 1.41 & Current ratio:
2.21
Leverage ratio: Debt to net worth: 0.44
– Profitability Ratio
Return on sales: 0.05
Return on assets: 0.09
Financial Analysis, Contd…
Stock and Market Trend Analysis

– Regular dividends
– .com boom
– Real estate & credit crisis- Buffering effect
Social Issues
Social Responsibility Report
– Pollution
– Working standards
– Factory-monitoring program
– Energy consumption
– Natural materials- Environmental consultancy (CH2M
Hill)
Investment in community
– Time
– Money
Ethical Issues
Hotline
100% score Human Rights Campaign’s
Corporate Equality Index
Mission Statement & Purpose- Ethics
Portfolio: Strategic Analysis
Distinctive brands
Common principles, and purposes
Purchase existing companies (Banana
Republic) or new establishments (Old
Navy from Gap Warehouse)
Suggestions
Increment in market
Diversification
E-commerce
9-Cell Matrix
Questions???