Gap 2Q Profits, Sales Fall

Chapter 11 Blog

Summary: One of the most famous casual clothing stores,the Gap has had difficulties maintaining its' sales standards. Gap has posted a second-quarter profit drop of 0.4 percent in sales in all four of its divisions. However, Gap strives to complete a successful turnaround by changing its brand and maintaining a smaller inventory. Gap has to face stiff competition from rivals such as Aeropostale and The Buckle, who have managed to achieve positive results with their young shoppers. Therefore Gap hopes to battle with its' competitors by focusing on advertising and marketing. In total, Gap had a net sales decline of $228 million, 7.3 percent to $3.24 billion



Connections: This article and chapter eleven have many things in common. Firstly, Gap is a type of merchandising business known as a retailer. A retailer is a business that buys goods from wholesalers and manufacturers and sells to the public. Gap has to deal with the two aspects of merchandise inventory, goods sold and goods not sold. If Gap sells its merchandise the amount is transfer ed to the Income statement, while the merchandise not sold becomes a Current Asset on the balance sheet. It can be shown as (Cost of beginning inventory) + (Cost of merchandise purchased) - (Cost of merchandise sold) = (Cost of ending inventory).



Reflections: From a teenager's point of view, i think that Gap will slowly perish into thin air. I have not bought any item from Gap since i was a little kid. They say that they are focusing on advertising and marketing, yet i haven' t seen a single add or change in their business ways. I also feel that their clothing is over priced for just a simple brand. As they have said in the article, there are many other stores to buy from that are much more attractive to the teenage eye. I will be amazed if the Gap can move away from the family business and become successful in this new fashion era.