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Analysts Upbeat on Gap After CEO Meeting
Friday December 13, 7:27 pm ET
By Jean Scheidnes
NEW YORK (Reuters) - Gap Inc.'s (NYSE:GPS - News) Paul Pressler, the chief executive tapped to lead the troubled retailer's turnaround, made a quiet Wall Street debut this week by meeting with select investors and analysts.
The brokerage firm A.G. Edwards upgraded its investment rating on Gap stock to "hold" from "sell" largely because analyst Robert Buchanan had met Pressler.
The meetings, held in New York on Thursday, were closed to the media and not broadcast over the Internet, and left many unanswered questions about the new CEO's plans for reviving sales and profits at the nation's biggest clothing chain, analysts said.
"He said, 'Look, I have to get back to you because we're still at the early stages of developing a strategy on that.' He was unable to answer questions relative to store base or things like that," said Lazard Freres analyst Todd Slater.
"It was a risk from his point of view, in terms of potentially disappointing people, because there are clearly a lot of decisions that have not yet been made," Slater added.
About 15 to 20 analysts attended each of two breakfasts with Pressler, a former Walt Disney Co. (NYSE: DIS - News) executive who was appointed in September to replace long-time Gap CEO Mickey Drexler.
"It wasn't an analyst conference per se. It was a handful of analysts that he took an opportunity to meet with and introduce himself because he was in New York," Gap spokeswoman Debbie Eliades said.
"So it wasn't a decision to exclude press. It was a decision to meet analysts since he was going to be in their neighborhood," she added.
Chief Financial Officer Heidi Kunz, Treasurer Sabrina Simmons, and Director of Investor Relations Evan Price also represented the San Francisco-based company in New York. The company held a separate gathering for "buy-side" investors.
A.G. Edwards analyst Buchanan, who raised his rating on Gap, also increased earnings-per-share estimates for two years out and forecast same-store sales growth around 5 percent. Buchanan was not available to comment further.
Pressler told analysts about a new key initiative to build a consumer research department for each brand -- a plan that appears to be a carryover from Disney, which performs daily surveys sampling customer attitudes and experiences, Todd Slater said in a research note.
Gap will do focus groups and exit surveys on a more regimented basis, and plans to use more product testing, something the old regime said it would never do, according to Slater.
Analysts also learned that Gap has 400 to 500 leases coming up for renewal on a yearly basis versus the previously reported 100, Wells Fargo analyst Jennifer Black said in a research note.
The retailer, which operates nearly 4,300 stores in the Gap, Old Navy and Banana Republic chains, enjoyed meteoric growth in the 1990s and later came under criticism for continuing to open stores while its sales were lagging.
In November, the company reported its first increase in monthly same-store sales, or sales at stores at least a year old, in more than two years.
"From an infrastructure perspective, Pressler believes Gap's systems in all areas require significant upgrading," Credit Suisse First Boston analyst Richard Baum said in a research note.
Pressler expressed his distaste for the campaign "Gap: For Every Generation" and said consumer feedback indicated it did not resonate with shoppers, according to a research note by Bernstein analyst Emme Kozloff.
He currently does not have plans to hire a chief operating officer, but he does plan to hire a head for the international division, Kozloff said.
Friday December 13, 7:27 pm ET
By Jean Scheidnes
NEW YORK (Reuters) - Gap Inc.'s (NYSE:GPS - News) Paul Pressler, the chief executive tapped to lead the troubled retailer's turnaround, made a quiet Wall Street debut this week by meeting with select investors and analysts.
The brokerage firm A.G. Edwards upgraded its investment rating on Gap stock to "hold" from "sell" largely because analyst Robert Buchanan had met Pressler.
The meetings, held in New York on Thursday, were closed to the media and not broadcast over the Internet, and left many unanswered questions about the new CEO's plans for reviving sales and profits at the nation's biggest clothing chain, analysts said.
"He said, 'Look, I have to get back to you because we're still at the early stages of developing a strategy on that.' He was unable to answer questions relative to store base or things like that," said Lazard Freres analyst Todd Slater.
"It was a risk from his point of view, in terms of potentially disappointing people, because there are clearly a lot of decisions that have not yet been made," Slater added.
About 15 to 20 analysts attended each of two breakfasts with Pressler, a former Walt Disney Co. (NYSE: DIS - News) executive who was appointed in September to replace long-time Gap CEO Mickey Drexler.
"It wasn't an analyst conference per se. It was a handful of analysts that he took an opportunity to meet with and introduce himself because he was in New York," Gap spokeswoman Debbie Eliades said.
"So it wasn't a decision to exclude press. It was a decision to meet analysts since he was going to be in their neighborhood," she added.
Chief Financial Officer Heidi Kunz, Treasurer Sabrina Simmons, and Director of Investor Relations Evan Price also represented the San Francisco-based company in New York. The company held a separate gathering for "buy-side" investors.
A.G. Edwards analyst Buchanan, who raised his rating on Gap, also increased earnings-per-share estimates for two years out and forecast same-store sales growth around 5 percent. Buchanan was not available to comment further.
Pressler told analysts about a new key initiative to build a consumer research department for each brand -- a plan that appears to be a carryover from Disney, which performs daily surveys sampling customer attitudes and experiences, Todd Slater said in a research note.
Gap will do focus groups and exit surveys on a more regimented basis, and plans to use more product testing, something the old regime said it would never do, according to Slater.
Analysts also learned that Gap has 400 to 500 leases coming up for renewal on a yearly basis versus the previously reported 100, Wells Fargo analyst Jennifer Black said in a research note.
The retailer, which operates nearly 4,300 stores in the Gap, Old Navy and Banana Republic chains, enjoyed meteoric growth in the 1990s and later came under criticism for continuing to open stores while its sales were lagging.
In November, the company reported its first increase in monthly same-store sales, or sales at stores at least a year old, in more than two years.
"From an infrastructure perspective, Pressler believes Gap's systems in all areas require significant upgrading," Credit Suisse First Boston analyst Richard Baum said in a research note.
Pressler expressed his distaste for the campaign "Gap: For Every Generation" and said consumer feedback indicated it did not resonate with shoppers, according to a research note by Bernstein analyst Emme Kozloff.
He currently does not have plans to hire a chief operating officer, but he does plan to hire a head for the international division, Kozloff said.
