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.
Subscribe to:
Post Comments (Atom)
Though Gap is facing troubles of declining revenue, the percentage of profit drop – 0.4%- seems to be a very diminutive amount compared to other businesses which decrease around 2-3% or even higher. However, the modern age is growing and increasing and style of cloths tend to become “old-fashioned” and even changing the companies name won’t help much in building more profit because the competition has already become popular by drawing in the majority of contemporary consumers. By keeping a smaller inventory and taking a few cutbacks may help in saving cash but the rest of the apparel or merchandise which is being thrown out due to the smaller inventory would lead to a plunge in equity and may not be beneficial to the business because to build back equity it depends on the success of the business which seems to be lacking.
ReplyDeleteI know it is only 0.4% but it is in all four of its divisions which could add up to more in the long run. It is good to keep up with the rate of sale and cash flow to catch the competition in the beginning before it is too late. I agree with Ryan that the merchandise at GAP is too plain and does not catch the consumers eye. I went to GAP just this weekend and noticed that although some T-shirts are of good quality, the style does not suit the teenagers of today. And when I did find something to my liking it was not in the range of how much I would pay for the item. Too expensive! I also noticed the smaller inventory of clothing. In my opinion I would have more inventory of a wider range of styles so it is more likely that people will buy their products.
ReplyDeleteJennifer Wong (block 1) Accounting 12