As reported by The Deal’s Richard Collings, it has been a rough few months for retail giant Gap Inc. (GPS) as its shares fell from a 52-week high of $43.90 cents per share to $31.70 per share at Tuesday’s market close. This represents a nearly 27.8% decline since late March. Comparable store sales for the Gap store chain were down 6% in the second quarter and 8% in August. At Banana Republic, same store sales were down 4% in the second quarter, while down 11% in August. Old Navy is the only segment which posted positive comparable store sales. Industry observers said that one way for Gap to help address its issues is to sell or spin-off one or more of its brands to better focus on turning around one brand rather than all of them. Gap could sell Banana Republic or its flagship brand while keeping Old Navy and growth brands like Athleta. Selling one of the brands would be more digestible for potential acquirers such as a private equity firm. Gap would not only have better focus, but could use deal proceeds to reinvest in its remaining portfolio. It isn’t entirely out of the question that an activist investor may get involved if Gap doesn’t act soon. Dissident investors have gotten involved in companies even where the founding family still holds a large stake, like at Dillards Inc. (DDS), where a number of activists have been involved over the years, pushing for changes at the department store operator. Gap’s founding Fisher family owns an above-40% stake in Gap.
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