Gap pole-axed investors after the close yesterday. The specialty discount bin reported a 5% decline in same-store-sales for December. Analysts were officially expecting -3.9% but I doubt they had any idea given how promotional Gap was during the holidays.
I shopped at the Gap on Black Friday. I took pictures because I’m that kind of dork. From the upper left those are pictures of Gap, Sean Connery disguised as a Japanese ninja in “You Only Live Twice” and a heap of what look like sweaters selling for 60% off at Banana Republic.
I’ve worked with the Gap. It’s a proud organization. I took those pictures at 7am on Black Friday because that’s when stores look their best for Christmas. Whoever told Gap Inc store managers to make their sales floor resemble a Haight Ashbury Salvation Army is an inept, sadistic bastard. The stores never had a chance and the store managers knew it.
I try to spy when I go to malls. I rarely buy anything and I take a lot of pictures in stores. I’m recognizable among a very select set of people, most of whom work in finance or retail so my hiding is a little absurd but I do it anyway. A little like a 6’3″ Scottish guy pretending to be a ninja.
On Black Friday I bought the Banana manager a coffee. She was looking at a month of warding off anarchy. If you’ve worked retail that table of sweaters is a ticking time bomb. The first time a customer looks for their size at the bottom of a stack it’s going to become a 60% off laundry hamper. I handed her the coffee without a word. She looked confused then smiled wanly. I may have heard a small whimper.
Anyway, Gap is an operational trainwreck and that shouldn’t be a shock. In their press release the CFO says she’s excited to bring in the spring merchandise. Here’s the thing: there’s no place to put it.
Gap came up short on revenue despite deep discounts. That means they’re still choking on sweaters and markdowns from winter.
I don’t short specialty. The stocks never go down in a straight line. Fundamentally Gap is terrible. When it turns there will be time to buy. Until then GPS is a murder pit. Yesterday the stock was up 5% before falling 8% after hours on this sales report. Specialty is a cruel mistress that way.
Retail has been strong this year. Sales were good (though most cos don’t report monthly anymore). I’m long LULU and ANF.
Here are the rest of the comps reported yesterday.If you enjoy the content at iBankCoin, please follow us on Twitter