There were some interesting and somewhat expected comments out of the new CEO of Gap Inc. (NYSE: GPS), Glenn Murphy. He was speaking today at the Piper Jaffray 28th Annual Consumer Conference.
Murphy noted that after visiting many stores (450 to 500) that the company plans to downsize some of its stores, and other stores would be closed, remodeled, or downsized over the course of 2009 and beyond. What is going to be an interesting play is that Murphy noted some of the kid’s and baby chains would be consolidated into the adult’s Gap stores in order to lower net rental costs. The company also plans to focus on the 6,000 to 10,000 square foot range, with the larger flagship stores remaining in major metro or high traffic areas. The company also plans to focus on the size of its OLD NAVY store brand.
Another key move will be a demand-driven inventory system starting this year to better monitor and stock its top selling items.
Traders like what they have heard so far. Shares are up over 5% at $17.90 on about 7 million shares. The only caveat here to consider is that this does very little for calendar 2008 and Murphy’s plan is probably two or three years behind what deposed CEO Pressler should have been installing.
There was no hint at all that OLD NAVY would be spun-off into its own company. Pitty. We see that strategy as one of the best solutions for the company to reinvigorate itself and to give itself a makeover that shareholders would able to realize value.
Jon C. Ogg
June 10, 2008
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