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CNN Today

The Gap Suffers Retailer Woes

Aired August 31, 2000 - 1:45 p.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

LOU WATERS, CNN ANCHOR: It's time to buy back-to-school clothing. But apparently, fewer parents and children are falling into The Gap. Sales at The Gap retail clothing chain are way down. So is its stock price.

Susan Lisovicz of CNN Financial News is in New York with more on The Gap's problems.

SUSAN LISOVICZ, CNN CORRESPONDENT: And there is a big gap from what it experienced a year ago, Lou. That's right, after the bell yesterday, The Gap, which has been nothing short of a retail phenomenon, said that its August sales are down 14 percent, experiencing particular problems with back-to-school sales; which is, of course, something that really drives August traffic, and essentially issuing a warning for the third and fourth quarters.

The Gap saying that it faces uncertainties in the retail environment. We're seeing particular weakness in denim. And if you see weakness for The Gap with something as basic as denim, you'll typically see The Gap suffer. The biggest culprit, for sure, is the Old Navy division, which had to do a lot of deep discounting to see any sort of merchandise move at all. And that's been the problem for The Gap.

And continuing problems ahead. The Gap now at a 52-week low. It's had all sorts of downgrades from analysts and the other analysts who haven't downgraded are cutting their earnings estimates. And so you're seeing a big rally on Wall Street today, but retailers aren't participating.

WATERS: Is it all -- is this an omen for all retailers?

LISOVICZ: Well, a lot of the problems that The Gap has experienced are particular to that retailer, but not necessarily in the sense that the environment we have right now. We've seen a slowdown in consumer spending, and that is certainly going to hurt all retailers, and the numbers that we're seeing today, Lou, aren't good: Abercrombie & Fitch, which is a big youth retailer, down three percent for the month; Target issued a profit warning, that's had phenomenal growth; Spiegel recorded a 20 percent drop; JCPenney, 4 1/2 percent. So it is a bad omen for back-to-school, especially.

WATERS: All right, Susan Lisovicz, in New York.

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