Earlier this week I used a new McKinsey study on the vanishing middle market to riff about the market schism, with aspirational prosumer piece at one end, and the commodity consumer stuff at the other — and Sears et al., getting squashed in the middle. Well, we have a nice example of how this phenomenon with a quintessential middle-market vendor being gored: Gap.
Analysts to Gap: ‘Time to get serious’
Plunge in profit prompts one analyst to call for breakup
By Jennifer Waters, MarketWatch
Last Update: 5:03 PM ET Nov. 18, 2005
CHICAGO (MarketWatch) — Analysts chastised Gap Inc. management Friday, going as far as to suggest the company be broken up, a day after the apparel and retail giant turned in a sharply lower third-quarter profit and pulled down its full-year outlook as consumers continue to shun the retailer.
“[It’s] time to get serious,” said Merrill Lynch analyst Mark Friedman. “It’s time to recognize who the customer really is, pay attention and win her back.”
Until then, Gap stock continues to suffer, tumbling nearly 10% in early trading with more than 11.3 million shares changing hands by late morning — almost three times its daily average. Shares hit an intraday low of $16.71, with analysts suggesting that they are likely to fall to October’s 31-month low of $15.90, before closing at $17.06, down almost 8%
Investors got out after the San Francisco-based company, which also operates Banana Republic and Old Navy stores, reported its worst quarterly sales and earnings results in more than three years. Another quarter of missing the fashion quotient — something analysts are now calling a structural problem — led to an eye-popping 20% plunge in profit to $212 million, or 24 cents a share, compared with year-ago income of $265 million or 28 cents a share.