Gap, Inc

Gap, Inc.- A Portfolio AnalysisGap, Inc.- A Portfolio Analysis

Pradeep SapkotaPradeep SapkotaAlbi AlikajAlbi Alikaj

Kristina DailyKristina DailySony ByanjankarSony ByanjankarMaureen AtienoMaureen Atieno

IntroductionIntroduction

Leading American specialty apparel retailerLeading American specialty apparel retailer

New York State Exchange (GPS)New York State Exchange (GPS)

Figures:Figures:– 150,000 employees150,000 employees– 3,139 stores3,139 stores– Brands: Gap, Banana Republic, Old Navy, Piperlime, Brands: Gap, Banana Republic, Old Navy, Piperlime,

Forth & Towne, and othersForth & Towne, and others– Worth: $13.32 billionWorth: $13.32 billion

HistoryHistory

Established: July, 1969 by Donald and Established: July, 1969 by Donald and Doris Fisher in San Francisco State Doris Fisher in San Francisco State University selling Levi’s jeans and recordsUniversity selling Levi’s jeans and records

Gradual Increment in net incomeGradual Increment in net income

Recession in 1970s- company’s reactionRecession in 1970s- company’s reaction

May, 1988- Reincorporated in State of May, 1988- Reincorporated in State of DelawareDelaware

Addition of other members in the portfolioAddition of other members in the portfolio

GAPGAP

Was created in 1969 with the original creation of Gap as Was created in 1969 with the original creation of Gap as a corporationa corporationIt is the parent member in the portfolioIt is the parent member in the portfolioIt offers extensive selections of classically styled, high It offers extensive selections of classically styled, high quality, casual apparel at moderate price points quality, casual apparel at moderate price points Products range from wardrobe basics such a denim, Products range from wardrobe basics such a denim, khakis and T-shirts to fashion apparel, accessories, khakis and T-shirts to fashion apparel, accessories, personal care products for men and women, ages teen personal care products for men and women, ages teen through adult, and maternity apparel. through adult, and maternity apparel. Gap stores also include GapKids, babyGap, and Gap stores also include GapKids, babyGap, and GapBody. GapBody.

GAP (continued)GAP (continued)

Gap stores make up more than half of all Gap stores make up more than half of all Gap, Inc. stores with more than 1800 Gap, Inc. stores with more than 1800 located in 18 countries. located in 18 countries.

Gap generated 39 percent of net sales Gap generated 39 percent of net sales during 2007during 2007

Currently Gap is the second major Currently Gap is the second major segment of Gap, Inc. after Old Navysegment of Gap, Inc. after Old Navy

Banana RepublicBanana Republic

Gap, Inc. acquired Banana Republic in 1983Gap, Inc. acquired Banana Republic in 1983Initially only carried two stores and safari motifInitially only carried two stores and safari motifToday, Banana Republic has 535 stores in North Today, Banana Republic has 535 stores in North America and Japan and a Web-SiteAmerica and Japan and a Web-SiteBanana Republic products range from apparel, including Banana Republic products range from apparel, including intimate apparel to personal care productsintimate apparel to personal care productsOffer sophisticated, fashionable collections of dress-Offer sophisticated, fashionable collections of dress-casual and tailored apparel, shoes and accessories for casual and tailored apparel, shoes and accessories for men and women at higher price points than Gap.men and women at higher price points than Gap.Target market includes business casual and consumers Target market includes business casual and consumers that have a sophisticated fashion sensethat have a sophisticated fashion senseMid-scale (not high-dollar, but far from discount) apparelMid-scale (not high-dollar, but far from discount) apparel

Banana Republic (cont.)Banana Republic (cont.)

Like most apparel companies, Banana Republic follows a seasonal Like most apparel companies, Banana Republic follows a seasonal pattern with sales peaking during back to school / work and holiday pattern with sales peaking during back to school / work and holiday periodsperiodsContributions to Gap, Inc. Portfolio:Contributions to Gap, Inc. Portfolio:– In 2007, Banana Republic’s net sales (in millions) were $2,548 in 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 comparison to Gap, Inc.’s net sales being $15,943, which equals to about 15.98% of the company as a whole.about 15.98% of the company as a whole.

– As per 2007’s Annual Report, Banana Republic’s net sales in the United 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 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). 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 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 Gap, Inc.’s net sales of $15,763, which equals to about 17% of the company as a whole.company as a whole.

– Overall, global sales growth of Banana Republic has continued to Overall, global sales growth of Banana Republic has continued to increase. Global sales growth from the previous year was 11%. increase. Global sales growth from the previous year was 11%.

Old NavyOld Navy

Subsidiary of Gap Inc., Old Navy was created in 1994 as Subsidiary of Gap Inc., Old Navy was created in 1994 as a low-priced retailer by the former CEO Millard Drexler.a low-priced retailer by the former CEO Millard Drexler.At first it was operated under the banner “Gap At first it was operated under the banner “Gap Warehouse.” But later on he changed the name as Old Warehouse.” But later on he changed the name as Old Navy, which was based on the name of the bar in Paris.Navy, which was based on the name of the bar in Paris.Old Navy was created to compete with the low-priced Old Navy was created to compete with the low-priced retailers like Target, Wal-mart, JC Penny, and others.retailers like Target, Wal-mart, JC Penny, and others.By the end of 2007, Old Navy has more than 1,000 By the end of 2007, Old Navy has more than 1,000 stores in the United States and Canada.stores in the United States and Canada.In 2000, Old Navy started its online store. i.e. In 2000, Old Navy started its online store. i.e. www.oldnavy.comwww.oldnavy.com

Old Navy (cont.)Old Navy (cont.)

Old Navy’s target market consist of Old Navy’s target market consist of fashion oriented and yet price conscious fashion oriented and yet price conscious teenagers and adults.teenagers and adults.

Offers a specialized section for infants, Offers a specialized section for infants, boys, girls, men, and women.boys, girls, men, and women.

It also have variety of accessories It also have variety of accessories including shoes, sunglasses, handbags, including shoes, sunglasses, handbags, and others.and others.

Old Navy (cont.)Old Navy (cont.)

Contribution to Gap Inc.Contribution to Gap Inc.By the end of 1997, Old Navy has $1.3 billions in By the end of 1997, Old Navy has $1.3 billions in sales, which represented nearly 20% of the Gap sales, which represented nearly 20% of the Gap Inc.’ s total revenue.Inc.’ s total revenue.Old Navy accounted for 16% of the total number of Old Navy accounted for 16% of the total number of stores operated by its parent company.stores operated by its parent company.In mid 2000, Old Navy accounted approximately In mid 2000, Old Navy accounted approximately 40% of Gap Inc.’s nearly $16 billion in total 40% of Gap Inc.’s nearly $16 billion in total revenue.revenue.As per 2007 annual report, $6.6 billions in sales, As per 2007 annual report, $6.6 billions in sales, which represented 42% of the Gap Inc.’s total which represented 42% of the Gap Inc.’s total sales.sales.

PiperlimePiperlime

Piperlime shoe which is a part of Gap inc. was started in Piperlime shoe which is a part of Gap inc. was started in oct.2006.oct.2006.The site was officially launched in Nov.2006.The site was officially launched in Nov.2006.It is an only online store and it only sells shoes.It is an only online store and it only sells shoes.The shoes are not affiliated with the Gap brand.The shoes are not affiliated with the Gap brand.The shoes are designed and branded by other The shoes are designed and branded by other companies.companies.They started the Piperlime shoe because they found that They started the Piperlime shoe because they found that most of their shoppers wore shoes from other brands.most of their shoppers wore shoes from other brands.It was less risky for them to start the company since they It was less risky for them to start the company since they would benefit from its success in ecommerce.would benefit from its success in ecommerce.

PiperlimePiperlime

Piperlime shoe offers an edited selection of designer and casual Piperlime shoe offers an edited selection of designer and casual brands.brands.They are able to offer shoes that customers want and they are able They are able to offer shoes that customers want and they are able to dress their customers from head to toe.to dress their customers from head to toe.Celebrity stylists offer tips on the latest fashion trends.Celebrity stylists offer tips on the latest fashion trends.With the growing online shoe sale annually by 15 percent piperlime With the growing online shoe sale annually by 15 percent piperlime has a capability of growing and earning more revenue.has a capability of growing and earning more revenue.The online sales in the second quarter of 2006 were up 27 percent The online sales in the second quarter of 2006 were up 27 percent because of the new site.because of the new site.The global growth of piperlime was 56 percent in 2007.The global growth of piperlime was 56 percent in 2007.To keep its operations efficient it has a dedicated distribution center To keep its operations efficient it has a dedicated distribution center in Grove city, Ohio.in Grove city, Ohio.It is headed by the senior vice president of Gap inc.It is headed by the senior vice president of Gap inc.Employees are buyers from their competitors and Gap veterans.Employees are buyers from their competitors and Gap veterans.

Managerial AnalysisManagerial Analysis

SWOT AnalysisSWOT Analysis

-Strength: Brand Image, Risk diversity, Strong -Strength: Brand Image, Risk diversity, Strong supply chainsupply chain

-Weakness: Limited market, No Fashion -Weakness: Limited market, No Fashion Identity, Over dependence on US, declining Identity, Over dependence on US, declining cash flowscash flows

-Opportunities: Expansion, E-commerce-Opportunities: Expansion, E-commerce

-Threats: Competition, Market nature, Tariffs-Threats: Competition, Market nature, Tariffs

Managerial Analysis, Contd..Managerial Analysis, Contd..

Five forces:Five forces:– CompetitionCompetition– Ease of EntryEase of Entry– SubstitutesSubstitutes– Strength of suppliersStrength of suppliers– Strength of buyersStrength of buyers

Distinction NotionDistinction Notion– Brand valued at $6,416 million (2006)Brand valued at $6,416 million (2006)– HistoryHistory– Old Navy, Gap, Banana Republic, PiperlimeOld Navy, Gap, Banana Republic, Piperlime

Financial AnalysisFinancial Analysis

Ratio AnalysisRatio Analysis– Solvency RatioSolvency Ratio

Liquidity ratio: Quick ratio: 1.41 & Current ratio: Liquidity ratio: Quick ratio: 1.41 & Current ratio: 2.212.21

Leverage ratio: Debt to net worth: 0.44 Leverage ratio: Debt to net worth: 0.44

– Profitability RatioProfitability Ratio

Return on sales: 0.05 Return on sales: 0.05

Return on assets: 0.09Return on assets: 0.09

Financial Analysis, Contd…Financial Analysis, Contd…

Stock and Market Trend AnalysisStock and Market Trend Analysis

– Regular dividendsRegular dividends– .com boom.com boom– Real estate & credit crisis- Buffering effectReal estate & credit crisis- Buffering effect

Social IssuesSocial Issues

Social Responsibility ReportSocial Responsibility Report– PollutionPollution– Working standardsWorking standards– Factory-monitoring programFactory-monitoring program– Energy consumptionEnergy consumption– Natural materials- Environmental consultancy (CH2M Natural materials- Environmental consultancy (CH2M

Hill)Hill)

Investment in communityInvestment in community– TimeTime– MoneyMoney

Ethical IssuesEthical Issues

HotlineHotline

100% score Human Rights Campaign’s 100% score Human Rights Campaign’s Corporate Equality IndexCorporate Equality Index

Mission Statement & Purpose- EthicsMission Statement & Purpose- Ethics

Portfolio: Strategic AnalysisPortfolio: Strategic Analysis

Distinctive brandsDistinctive brands

Common principles, and purposesCommon principles, and purposes

Purchase existing companies (Banana Purchase existing companies (Banana Republic) or new establishments (Old Republic) or new establishments (Old Navy from Gap Warehouse)Navy from Gap Warehouse)

SuggestionsSuggestions

Increment in marketIncrement in market

DiversificationDiversification

E-commerceE-commerce

9-Cell Matrix9-Cell Matrix

Questions???Questions???