Tuesday, July 8, 2014


The Gap understands there is a new supply chain paradigm.
From Financial Post--

The Gap Inc upgraded as initiatives expected to pay off

Among other initiatives, The Gap Inc. is testing things like self-checkout and mobile checkout via associates
Jin Lee/BloombergAmong other initiatives, The Gap Inc. is testing things like self-checkout and mobile checkout via associates
The Gap Inc.’s supply chain and customer service initiatives are expected to reduce its need to mark down merchandise, prompting an upgrade by Canaccord Genuity analyst Laura Champine.
She believes the retailer’s new online services will improve traffic and conversion rates (the proportion of store visitors making purchases), while the shift to a more responsive supply chain should allow Gap to reduce costs, shorten lead times and provide more consistent trend-appropriate products.
“We expect these efforts to result in leaner inventories and greater margin contributions as markdown and promotional levels decrease,” Ms. Campine said in a note to clients, raising her rating on the stock to buy from hold.
The analyst raised her target price to US$51 from US$40, noting Gap’s upside potential is not fully reflected in the share price.
She forecasts the company’s EBIT margin will rise 130 basis points between fiscal 2014 and 2018, while her 2014 earnings per share estimate of US$3.02 is US8¢ above analysts’ average estimate.
Gap’s online sales have grown at a compound annual rate of 17% in the past five years, and it doubled its e-commerce penetration to 14% in fiscal 2013. During the same period, Ms. Campine noted the online penetration in total U.S. retail sales has grown to 5.8% from 3.6%.
“We expect Gap to sustain penetration gains, particularly as mobile and digital innovations continue to drive a shift in consumer spending trends online,” the analyst said, highlighting the company’s reserve in store, find in store and ship from store services.
Gap is also testing things such as self-checkout and mobile checkout via associates and working to develop more targeted emails, which should further improve the in-store experience for customers.
“More than just expanding its e-commerce business, we believe the company’s online initiatives should drive growth across all channels,” Ms. Campine added.