My Foolish colleague, you just don't "get" Gap. And not surprisingly. By your own admission, you're not "young and hip." So maybe you should take a pass at passing judgment on that which is. From the recesses of your fashion imagination come "propellor beanies with matching cardboard box activewear." Cute -- but something of a gap in your understanding of Gap's market.
You make a good point that stateside, Gap's same-store sales have been flat. However, Gap's management has been aggressively working on changing that, through various store restructurings and marketing initiatives. Not that it matters all that much. The brilliantly branded Gap will thrive no matter what happens in the economy because its segmented brand strategy covers the economic spectrum, from affordable Old Navy to high-priced Banana Republic. A recession hits -- Old Navy will thrive. We continue to boom -- all segments do well. How many other retailers have this security?
As for your accusation that Gap is overvalued? Yawn. Gap deserves a premium in the retail sector because they are the DEFINITIVE Rule Maker of the bunch.
Finally, stellar management has had the vision to lead Gap to where it is today and will continue to revolutionize the industry in the future. Anyone who invested at the IPO in 1976 would have shares with a cost basis of $0.11 each. In the last 10 years, the stock has had a compound annual growth rate of 39% (assuming reinvested dividends). Gap boasts one of the strongest management teams in the industry's history, with the experience and ability to innovate -- the critical traits for retail success.
Gap based its original concept on a desire to capture teenagers in the generation gap. As long as humankind yearns to be comfortable, chic, cool, and cutting-edge, Gap will experience no gap in profitability.
The only ones "sobbing" will be those missing the opportunity to invest in a proven winner.
This Week's Duel
Related Links