Good News About Gap? Wait...

It was widely reported this week that Gap, Inc. would be closing 200 Gap and Banana Republic stores, whilst increasing store counts by 270 on Old Navy, their “discount” brand, and Athleta, athletic apparel.

On the news, Gap stock (NYSE:GAP) soared 7% in one day.  This means the stock market thinks it is good news.

Really? Please help me understand:

1.     The general message is that there was a merchandising failure in Gap’s two oldest and signature branches. Per Arthur Peck, CEO, described the downturn as “significant and acute” and said the company made “creative missteps” that led to the sales decline. (http://money.cnn.com/2017/09/06/news/companies/gap-banana-republic-stores-closing/index.html?section=money_topstories)

a.     Meaning: they lost their merchandising mojo at both of their key businesses. Thus, losing the customer’s attention and dollars to competitors (like Inditex and Uniqlo?)

2.     What are they doing to right the ship at Gap and Banana Republic? IF Peck doesn’t give us an idea, we have to wait and see. For all we know, they have no clue and are just going to let the two businesses continue to decline, hoping for resurrection from the other two branches, Old Navy and Athleta. Which means more store closings in the future, or even abandonment as with Limited.

3.     IF they hope to resurrect the Gap and Banana Republic business, what is their plan? New merchandising, new positioning, new senior staff (the fish stinks from the head, goes an old Argentinian saying)? All of the above?

4.     IF Old Navy is to be the flagship of the future, that means the unit sale is lower, so they will need more and more stores or more and more customers to keep growth, or both. What indications do we have that Old Navy can do that? How are they favorably positioned in the market to meet the category killers?

5.     The market cap of the company has declined more than 50% since 2013. (https://ycharts.com/companies/GPS/market_cap) As a potential investor and before I put any money into the stock, I would like to feel comfortable based on the above that it is not going to continue to decline.

This is not to say that Gap does not have definite plans to address all of the above NOW-I don’t know (if not definite plans and just thinking about it, maybe too late by the time the plans put into practice and merchandise delivered).

If what you are doing fails (closing stores is a sign of failure), you need to change something. Why did you fail? What are you doing about it?

Conclusion: As a stock market investor with liquid capital, I would absolutely not invest in GAP at this time. If anything, the good news without the rest of the story is not good enough news to separate me from my money. I need more information.

Finally, the situation at Gap (as far as we can see) may be symbolic of a widespread problem today, which I have pointed out numerous times: Companies simply accept the problems they have as “market forces” and out of their control. I disagree. Both failure and success is totally in your control. You just need to change with the market or, preferably, be disruptive and lead. It seems to me that, in today’s challenging market, many managers and companies just cannot get out of their own way.

Let Doubts Win, You Lose

Doubt can be healthy. The epidemic of spam calls and emails teaches us to doubt.

But doubt can also be deadly if not managed. For job seekers, it is the elephant in the room.

There is no perfect entrance in life. Doubts will always be there. Every team that starts a sports match has doubts as to whether they will win or not. IF they are behind in the score, even late in the match, they surely have doubts. The record of wins and losses largely confirms the victories, not only over the other team, but over doubt itself.

Doubt can make you downright scared. Especially if you are facing a dark time. There are many stories, such as the iconic famous book/movie, “The Pursuit of Happyness,” where a person was so far down and came back. There is a saying to the tune of, “I was so far down, I could only go up from there.” I don’t agree. You can always go down.

I am sure the icons of our time who have achieved great things, such as Mark Zuckerberg, Amancio Ortega, Stephen Jobs, etc. must have had great doubts at some point. Not just when they started out, but also as the decisions got bigger and bigger.

So how to go forward in life and not let doubt win?

1.     Acknowledge doubts. You can’t banish doubt from your thought process. You need to consciously acknowledge doubts and what they are. Anyone who tries to sublimate doubt increases the risk of doubt winning. Doubt feeds on that like a cancer.

2.     Know that every opportunity requires risk. There is no doubt about this. There is no free ride to new territory.

3.     Recognize the risks. OK, so there are risks. Always. What are they? Get them on the table.

4.     Evaluate the risks and be clear on your course. Once you know what the risks are, you can make a decision.

5.     Be at peace with “the road not taken”. Frost said it best in his iconic poem of the same name. Go/no go. Left/Right. Both are ok. But only if you owned up to the consequences of the route you chose and don’t look back and regret the one you didn’t.

6.     Understand that no battle is won without casualties. Don’t expect the route to roses to be lined with roses. There are the thorns.

So what if you recognized your doubts, you took the risk and it didn’t work? Learn from your experience and move on. I believe every success story has an element of failure. How many failures until success is, well, maybe just luck. Or better still, it is a catalogue of lessons you need to learn to be successful.

I am not the first to say this, nor will I be the last. Managing your doubts, big or small (they can seem SO big sometimes), will help you to avoid the worst situation a human being can be in: frozen by doubts.

This is my personal lesson to share.

Right or Wrong? September 2017 UPDATE

I write articles because I am excited about the future of business (the challenges make it more exciting!), and the articles always have a prediction or recommendation. Having made those, I should follow it as the story develops. Then, I should publish updated news, regardless of whether it makes my original story right or wrong. Last, update the story with new details when it is called for.  This is consistent with my principle that change is constant and fluid, a circle that keeps renewing itself; and that the opposite of change is death. The essence of change is change itself; if the story changes and you don’t see it and act accordingly, or, if you were wrong in the first place, and don’t rectify your course-well, your future doesn’t look so good.

So what am I talking about-here and now?

My blog is too new for some of my vision to come to total fruition. But there are significant snippets of news or updates that I noted and want to share. Let’s go:

1.     Social Compliance- In my article, “Social Compliance-A Needed Reevalution, “ (http://www.isourcerer.com/2017/06/social-compliance-needed-reevaluation.html )I called for a simplification of the audit process, and for government and local industry to set mandatory principles and take ownership of the process. And for customers to simplify their requirements to what is really important. This would result in a simpler process that factories would embrace, and less cheating and corruption.

a.     Let’s be clear that this is still not happening in China. And the same old corrupt and overcomplicated process is still ongoing.

b.     But, there are efforts being made elsewhere. In Bangladesh, the BKMEA (Bangladesh Knitwear Manufacturers Export Association) is attempting to set standards and oversee health and safety compliance in its factories, as well as providing guidance and training. (http://www.bkmea.com/BKMEA-at-a-glance.html)

c.      Also in Bangladesh, there is the Accord on Fire and Building Safety in Bangladesh, an agreement between brands and trade unions for remediation of unsafe conditions, such as existed in the famous Rana Plaza fire. The August 2017 report suggests that great progress is being made (http://bangladeshaccord.org/wp-content/uploads/Accord-Quarterly-Aggregate-Report-August-2017.pdf) The AWFBS, Association for Workers Fire and Building Safety, with similar structure and goals. Note that Bangladesh has announced that it will take over administration of these issues in 2018 (https://sourcingjournalonline.com/bangladesh-form-factory-inspection-platform-us-led-alliance-steps-aside-td/); that could be very good or very bad.

d.     The Social and Labour Convergence Project out of Amsterdam seeks to establish an accepted world standard and relieve “audit fatigue” (http://slconvergence.org) . This is a great idea if the single standard is simpler, not more complicated. I am afraid that global accords like this are difficult to achieve-the more cooks in the kitchen, the more muddy and unappetizing the soup.

e.     Conclusion- Efforts are being made, and that is good. At the rate it is going, however, the results will take too long. It will take US or China government, in conjunction with brands, to do something dramatic which will accelerate change. Good luck with that..

2.     Category Killers- My Article of the Same Name (http://www.isourcerer.com/2017/08/the-category-killers.html) These are retailers such as Zara, Uniqlo, Aldi, Lidl, whom I have predicted, most recently in the above article, (but repeatedly since I started my blog), will change the world of retail. Their penetration and importance at retail continues to increase. Here are some updates:

a.     H&M has opened a new division called Arket. It is a polyglot of merchandising like Zara (specialty brands like Massimo Dutti), Uniqlo, and Muji, décor like IKEA. Much different than their flagship stores, higher priced (I assume higher quality), but still in the category killer range. (https://www.kantarretailiq.com/Conversation/ConversationDetails.aspx?id=1501715&krsrc=mhi&utm_source=Linkedin&utm_medium=LinkedinPost&utm_campaign=H%26MArket&utm_content=TiffanyHogan )

b.     Aldi has announced in UK that it will shorten payment terms in UK from an average of 33 days to 14 days, effective immediately. Brilliant! First, it could come back to bite Aldi if they were offering low prices to customers, yet choking their suppliers. Second, it seems to me it is a gauntlet thrown down to their competitors that the stakes are now a cash game. Third, as a supplier, I am more likely to give better prices to customers who pay quickly. Wait for more news on this one. (http://www.insider.co.uk/news/aldi-gives-suppliers-boost-shortening-11080523 )

c.      “Retailers Should Think More like Zara.” What I said. Faster (speed to market) fashion, more and more fluid seasons to encourage repeat purchases, quality and value pinpointed on the consumer’s expecations (not an abstract, or margin-driven, strategy). Seems they all had a meeting at Magic in Las Vegas and figured this out. To me, “more like” doesn’t mean copycat-see the direction, acknowledge it, and shape it in your own image. (https://www.forbes.com/sites/deborahweinswig/2017/08/28/retailers-should-think-like-zara-what-we-learned-at-the-august-magic-trade-show/)

d.     Conclusion: The Category Killers keep killing it. If you are NOT them, and thinking and acting on how you can be more like them and take some of their thunder, they will continue to gain more ground on you.

As a trend tracker, you must keep your ear to the ground and your eyes in the sky. Per my commitment, I will continue to update these trends as they develop, and modify or restate my conclusions accordingly.