I chose to research two very different apparel retail stores. The GAP, Inc. and Nordstrom, Inc. are very interesting companies to me because they deal with something that is very important to me and a lot of people, clothes. Everyone buys and wears clothes, and these are two companies who have succeeded in this venture. They both started out with the same intentions, to sell apparel through specialty stores, but at this point Nordstrom’s has been more successful.
In theory these two companies are very similar because they are trying to accomplish the same thing. They both sell apparel, shoes and accessories for women, men and children through specialty and clearance stores. The clearance stores mentioned are Nordstrom Rack and GAP factory outlet stores. They also stress the use of personalized customer service. The GAP and Nordstrom feel that good customer service is the way to keep customers happy and thus keep them loyal. Because of this, they have many employees to serve their customers and spend a lot of time training these employees.
These companies are also set up in the same way. They each have a chairman, president, and a couple of vice presidents. They both operate on the New York Stock Exchange. Another interesting similarity is that they both are based out of the west coast, The GAP in San Francisco and Nordstrom in Seattle. But this is where the similarities end.
The sizes of these two companies are very different. The GAP is a global retailer with about 3,700 stores and 166,000 employees worldwide. Nordstrom on the other hand has about 77 stores nationwide and 43,000 employees. It does operate one international boutique, Faconnable, mainly in Europe. The GAP has three brands including GAP, Banana Republic and Old Navy, all operating in their own stores. Because of this huge difference in size, the GAP has much higher revenue than Nordstrom, but this doesn’t mean that it’s a better company.
In the news lately, the GAP has been under a lot of scrutiny because its sales have been down so much causing their credit rating to lower as well. Investors feel that this is due to the sharp slowdown in consumer spending, growing competition and series of fashion misses. It has too many stores open to sustain this major hit on sales. They have very little debt, but analysts think that this combination spells a future bankruptcy. This would only happen if the company could no longer meet its financial obligations, thus allowing the court to divide it’s assets among the creditors. The GAP assures consumers and investors that this isn’t going to happen though because of the amount of cash it has.
Nordstrom on the other hand has done very well in the past year. So well that its fourth quarter profits were up 88 percent. This has happened because of new stores and progress in the areas of expense management and inventory control, which caused sales to go above and beyond what it spent for salaries and other expenses during those three months. The GAP didn’t do as well. It is expected to not have a profit at all this year, instead a loss of $22 million. This is because its costs and expenses are more than its sales. This is unfortunate, but a sad reality of the business world.
I learned a lot doing this paper. I never realized that the GAP was having so many problems, but now I am fully aware of this. It seems like they were doing just fine, but now that I think about it, they did kind of go awry the past couple of seasons. I’m sure they didn’t see this coming and hopefully they’ll be able to bounce back and recover from this. Nordstrom was a very interesting company to look at as well. They definitely have a good thing going. Just enough stores open and sales to give them a profit. I just hope that the same thing doesn’t happen to them as the GAP. It would be hard to see such a rock in the apparel industry go under. But according to analysts, this definitely won’t be happening any time soon. I now see how