Gap is displaying all the classic signs of a retailer in trouble: dwindling sales and not enough exposure to e-commerce. After becoming a staple of the high street in the 1990’s, the company now appears to be falling out of fashion. But management has a big plan to turn things around which could benefit investors buying in at the current multi-year lows. Read on to find out why we’re excited by the strategy.
US fashion chain Gap Inc (US: GPS) is still a fixture in shopping centres and high streets around the UK. But shares in the firm have fallen by nearly 60% over the last five years, as it struggles with retail sector headwinds and company-specific problems.
Management now plan to split the company in two to try and revitalise the group's portfolio of brands, which include Banana Republic and ‘athleisure’ brand Athleta. The faster-growing Old Navy discount brand will be spun out into a separate business, while the remaining Gap brands will be grouped together and (hopefully) revived.
With Gap shareholders set to receive shares in the new Old Navy business, this could be an opportunity to buy a growth stock at a value price.
When Gap launched in 1969, the firm's target customer base was 12 to 25 year olds. Early stores sold just two things, music and jeans, with a focus on the iconic Levi…