Cynthia Sanner got to Gap Inc.’s New York store Dec. 1 on Fifth Avenue two hours before it opened to make certain she would get one of French designer Roland Mouret’s dresses made exclusively for the clothing chain.
She needn’t have bothered. She stood alone for an hour and 20 minutes before being joined in line by two other shoppers. “I was shocked,” said the 35-year-old personal assistant from New York. “I thought it was going to be a mob scene.” Sanner’s experience suggests that not even borrowing a tactic used by Swedish rival Hennes & Mauritz AB will help Gap ignite holiday sales. Chief Executive Officer Paul Pressler is struggling to lure shoppers after comparable sales declined in 27 of 30 months. H&M drew throngs by partnering with designers such as Karl Lagerfeld and Stella McCartney.
More retailers are using high-end designers to boost traffic and sales. Target Corp., the second-biggest U.S. discounter, sells Isaac Mizrahi clothing while Kohl’s Corp. will sell a collection by Vera Wang.
Unlike Stockholm-based H&M’s treatment of its designs, Gap didn’t display Mouret’s name in stores or windows or even on the clothing. “It’s missed execution,” said Mark Montagna, a New York-based CL King & Associates analyst who rates Gap “underperform.” “It’s good they are doing this test,” Montagna said. “It’s more to raise the image of the Gap brand. But it’s a missed opportunity.” Gap Shares San Francisco-based Gap’s shares rose 28 cents, or 1.5 percent, to $18.96 at 4 p.m. in New York Stock Exchange composite trading. The stock has increased 7.5 percent this year, compared with a 13 percent gain on the Standard & Poor’s 500 Index.
Analysts estimate Gap’s profit will decline for a second year as slumping sales force the retailer to discount. November sales at stores open at least a year tumbled 8 percent.
“They already blew” the holiday, said Montagna. Sales will keep falling this year, he said.
The holiday quarter is the biggest for Gap and other retailers. Last year, November through January accounted for 32 percent of industry profits, the International Council of Shopping Centers said.
Retailers’ holiday same-store sales in November and December may rise as little as 2.5 percent, the ICSC said. The projection came down from an estimate of 3 percent after Wal- Mart Stores Inc., the world’s largest retailer, reported its worst month in a decade.
European Sales Gap sold a larger Mouret collection in Europe last month. Priced in the U.S. from $88 to $108, five dresses were black and one was red. They included cowl-neck and capped sleeves and were sold at seven New York Gap stores. Spokeswoman Robin Carr declined to give the European sales performance, except to say the company is “very pleased with customer response.” Mouret’s designs have been worn by celebrities Nicole Kidman and Cameron Diaz.
The number of Gap shares that have been sold short rose 75 percent in November, the biggest gain among apparel retailers tracked by Credit Suisse as “investors speculate that holiday sales will be lackluster,” the firm wrote in a Nov. 30 report.
Investors can profit from a falling stock by selling borrowed shares and buying them back later at a lower price.
Elusive Name At New York Gap stores, Mouret’s pieces were featured in windows with a sign reading, “The Five Dresses. Limited Edition. Designed Exclusively for Gap.” Nowhere did Mouret’s name appear. When H&M in November sold Dutch duo Viktor & Rolf’s collection, their name was prominently displayed and lines snaked around the outside of stores.
“I don’t think it was well-publicized,” said Kate Casey, 30, a registered nurse from New York who said she hadn’t shopped at Gap in two years and came only to buy the dresses. “I even went online, and they didn’t have this on the Web site.” To boost holiday sales, Pressler introduced a television commercial for the Gap brand after an absence last year, and increased radio and direct mail for its Old Navy chain. On the Friday after Thanksgiving, more than 150 Gap outlets opened at midnight, compared with about 10 last year.
The third-quarter introduction of skinny black pants with advertising featuring Audrey Hepburn, and clothes supporting singer Bono’s AIDS campaign also failed to boost traffic.
“We have lost confidence in management’s ability to source the right product,” wrote Todd Slater, an analyst at Lazard Capital Markets, which lowered Gap’s rating to “hold” from “buy” on Nov. 30.
‘Different Avenues’ In addition to the Roland Mouret partnership, Gap is working with a number of other “individuals,” Carr said.
“It’s encouraging to see they are trying different avenues,” said Lawrence Creatura, a portfolio manager at Rochester, New York-based Clover Capital Management who said he’ll consider buying Gap shares if sales improve.
The key is converting shoppers like Barbara Saunders, a 48- year-old museum curator from Ormond Beach, Florida. Saunders, who hadn’t been to a Gap in two years, bought three Mouret dresses and browsed through other racks.
“I was shocked there were so many cute things,” she said. “I’m going to try to encourage my girls to shop here.”
