Is it over for the Gap?

It certainly looks that way, I can't remember the last time they reported a decent quarter. Last week's earnings call marked the Gap's ninth consecutive quarter of negative same-store sales growth. This latest earnings call for The Gap Inc. (NYSE:GPS) was like a broken record - flat sales when compared to last year and same-store sales fell overall by 5%. Only one out of the four major divisions at the Gap (Gap North America., Old Navy North America, Banana Republic North America, and International) saw positive sales last quarter, the winner being Banana Republic. The remaining three had negative sales growth including Gap North America and Old Navy North America tying at -7%. The constant advertising you see every five seconds on TV for the Gap with celebrities Common, Seal, Claudia Schiffer, and Bow Wow still isn't making a difference.

The latest 'Peace, Love, Gap' campaign doesn't seem to be bringing in the customers but it is paying the musicians and actors a hefty sum. It's tough to pin point the exact actual dollar amount the Gap spends on advertising, they roll it into their Operating Expenses (including payroll, general & administrative expenses, etc.). Operating expenses alone were $4.1 billion in 2005.The Gap has shelled out big bucks in prior years to tie celebrities to Gap clothing - Madonna, Sarah Jessica Parker, and Missy Elliot to name a few. Sarah Jessica Parker reportedly earned $38 million with her endorsement deal. Imagine how much they paid to get Madonna?

I thought the whole point was to sell clothes? These guys are still in the clothing business right?

It's as if the marketing department has become more interested in putting together a star studded catalog of music then a stellar line of clothing. This latest round of celebrity endorsement sounds like a night at the MTV music awards. The Gap can't win any music video awards, so why are they trying so hard? Not all retailers have shelled out millions to pop stars to raise their stock price, take a look at J.C. Penny (JCP) and Sears (SHLD). I don't remember seeing either of these companies produce a rap-video like commercial that 'pimped' their apparel and their 52-week charts are holding up just fine.

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