Gap Inc.
(GPS), a premier international specialty retailer, plans to re-launch its denim line to bring back customers and revive its sagging sales.
The move is a part of a major revamp process of the self-branded denims for men and women that have seemingly lost its mass appeal to trendy fashion jeans by a host of its rivals. Denim had been the cornerstone for the company, accounting for 20%−30% of the total Gap brand sales. However, Gap jeans were gradually falling out of favor as it failed to update itself with the changing times.
The new denim line focuses on easy fittings and claims to be more stylish and premium. Most of the styles are priced at $54 and $59, while the more complicated wash jeans are priced at $69. Gap is promoting its new denims through a digital and print marketing campaign called “Born to Fit”.
For its new line, Gap has assembled a production team and trained its senior factory workers on new sewing techniques to produce better-fitting jeans that are of good quality. The denims are targeted to customers in the age group of 25 to 35 years.
Gap offers a diverse range of clothing, accessories, and personal care products for men, women, children and babies. Its flagship brands include Gap, Banana Republic, Old Navy, Piperlime and Athleta. Gap is the leading player in the highly fragmented specialty retail sector and has a market cap, which is more than double its nearest competitor. The company has a strong balance sheet with adequate liquidity and no outstanding debt. We maintain our Neutral recommendation on the stock.
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