Tomahawk, WI 10/15/2013 (BasicsMedia) – The Gap Inc. (NYSE:GPS), with a market cap of $17.22 billion, is a global apparel maker. It caters for men, women, children and babies through its specialty apparels. Some of the brands which the company boasts of producing include Old Navy, Piperlime, Banana Republic, Gap and Athleta. It operates company stores in the U.S, Italy, Canada, Japan, Ireland, China and France as well as the UK. However, not everything is going well for GPS, which only last month reported a drop in its monthly sales. How does the drop in sales affect GPS as a stock?

Extent of GPS Drop in Sales

The breakdown of drop in sales provides a very interesting picture. The company’s same store sales experienced a drop of around 3%, compared to 1.8% which several analysts had estimated for the same. Last year during the same period as this, GPS reported that its global sales had grown by around 3%. The situation has now changed to a point where the company reported a drop in sales of also 3%. The company has said that the main reason for this drop is due to consumer behavior where many of them have cut down quite significantly on their spending.

 What Could Have GPS Done to Cushion Itself Against the Drop in Sales?

 GPS is unable to effect much change in terms of improving consumer’s spending patterns since this is beyond its control. The tax regime is quite high and this had discouraged many customers from spending amounts of money which they were accustomed to in the past. GPS also currently stocks apparel which is aimed for the fall. Currently the weather is much warmer hence convincing many shoppers not to buy clothes for the fall. The recent government shutdown, which was the first in 17 years, had a knock-on effect on sales by companies such as GPS.

 GPS, just like other retailers, has now been forced to offer a lot of discounts as a way of attracting consumers to go to its stores and shop. The full effects of this move are yet to be seen. But the situation may change now that the holiday season is just around the corner. As the effects brought about as a result of the government shutdown begin to wane, GPS will enjoy better sales from its customers. The news regarding GPS drop in sales, has affected the stock which is also experiencing similar downward trends since the announcement was made.

Holiday Season Will Compensate GPS Drop In Sales in September

Just like I said earlier, I think the approaching holiday season will do wonders for GPS in terms of sales and revenue. This is a season which many retailers look forward to because shoppers overcome their fear and apprehension regarding buying apparel and other items, and increase their purchases.  A major retailer such as Amazon.com Inc has said it intends to hire some 60,000 new staff to help them through the holiday season when sales are given a major boost. The sales GPS will make in the holiday season will compensate its losses in September 2013.

Therefore, I believe there is no reason why investors and analysts should worry about GPS drop in monthly sales in September 2013.

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