GAP Group $16 billion is a challenge not a temptation

At the beginning of the new year, rumors concerning the “international restructuring of the well-known US apparel retail giant Gap Group and its intention to sell the assets of the group as a whole or in part” are growing.

On January 8, affected by rumors, the Gap Group's overall share price fell by 7.25% and the New York Stock Exchange closed at $20.26. However, the total number of stock transactions reached 28 million shares and the market value was approximately 16.5 billion US dollars.

On January 9th, Gap Group held a temporary board of directors at its San Francisco headquarters, and related announcements will soon be issued.

On January 10, GapAdult president Dennis Johnston announced his resignation.

The success of the Gap Group in the coming days of Group assets and the upheaval of the Group's senior executives has undoubtedly become the focus of attention in early 2007.

Is the sale a good way to change the fate of the decline? Is frequent replacement of high-level personnel the culprit of this huge clothing group's operational bottleneck? Who will take over the Gap Group? Who will become the king who will reverse Gap’s leap in 2007? The answer is still waiting.

GAP predators rumors will be sold

The management of Gap tried to get rid of the difficulties within three years, but the efforts to rejuvenate the enterprise failed to succeed for various reasons.

The New Year has just begun. There are rumors in the industry that the US apparel retail giant Gap is planning an internal reintegration.

According to sources on Wall Street in New York, Gap Group is looking for a suitable opportunity to sell its brand BananaRepublic, and even has the possibility of selling the entire group.

At present, Gap Group management declined to comment on this rumor.

On January 8th, as market investors worried that the Gap Group, a clothing retailer based in San Francisco, might sell part or whole, the company’s overall share price fell by 7.25% and it closed at $20.26 on the New York Stock Exchange.

Market rumors originated from a report issued by CNBC which showed that Gap Group has hired investment bank Goldman Sachs to help find suitable buyers. GoldmanSachs company denied the news a few days ago. Also on January 8, Gap's stock trading totaled 28 million shares, while the average trading volume of Gap stocks was only 6.8 million shares in the previous three months. At present, Gap's market value has reached 16.42 billion US dollars.

If the report concerning Goldman Sachs’ intervening in the Gap Group’s transaction is true, this also confirms the initial intention of the Gap Group’s board of directors to reach a partial or total sale, showing that the company has initiated an internal restructuring plan.

A retailer stated: "To judge whether a transaction is cost-effective requires a correct perspective and insight into the market."

On the other hand, the investment bank Goldman Sachs was hired to operate the reorganization, saying that Gap’s founder, the Fisher family, was preparing to withdraw from the fashion retail business after 40 years in the fashion retail business, cashing out stocks in the hands.

Gap has experienced some twists and turns in the past few years. Although management tried to shake off the difficulties during the past three years, the efforts to rejuvenate the enterprise were ultimately unsuccessful for various reasons. Gap's performance in the stock market has become sluggish, and management also hopes to uplift its share price through mergers and acquisitions. The Fisher family holds a 37% stake in Gap.

In 1969, Don Fisher and his wife Doris opened the first Gap chain store in San Francisco, and has grown to become one of the world's largest fashion specialty retailers. With 3,000 stores, sales revenue reached in 2005. 16 billion U.S. dollars.

Fisher, who is 78 years old, is currently the Honorary Chairman of the Group. His son, Robert Fisher, serves as Chairman of the company.

However, Gap’s rapid development and even its significant impact on the US casual wear industry can be attributed to the outstanding contribution of Millard Drexler. Drexler is currently Chairman and Chief Executive Officer of J.Crew Group. In 2002, Gap Group withdrew from the board of directors after a series of consecutive sales seasons.

However, industry analysts believe that Drexler is the right person to take the Gap out of trouble and return to the high-speed development track. However, given Drexler’s current status and working status in the J.Crew Group, it is unlikely that he will return to Gap. Last year he reorganized the J.Crew Group into one of the most successful listed retail companies of the year. Drexler owns 12% of the company.

In the face of selling rumours, consultant Walter Rob said that Gap wants to get out of business difficulties, change its management strategy, and simply relying on selling brands is not enough.

“The Gap Group has already transformed its lower-level structural organization and it is time to restructure its senior management. The company recently announced that it will focus on denim jeans products this spring, but the outlook is not very optimistic. It is already a commonplace topic for the group to be more creative. In the context of globalization, new business groups should take the consumer's needs as their business direction."