The Gap Inc. - GPS

The Gap Inc., stock ticker GPS, is a leading global specialty retailer with a strong portfolio of brands and fiscal 2010 revenues of $14.66 billion! Gap, Inc. was founded in 1969, with a single store in San Francisco, CA. Today, they own and operate 3,200 store worldwide. They are continuing to grow in the United States and internationally. They are committed to serving the needs of their customers while delivering quality earnings and long term value to their shareholders. GPS pays a 12 cent quarterly dividend per share, which is currently a 2.53% dividend yield. Their products include clothing apparel, accessories, and personal care products for men, women, children, and babies under the Gap, Old Navy, Banana Republic, Piperlime, and Athleta brands. Most of the products sold under their brand names are designed by the company and manufactured by independent sources. GPS operates in two segments: Stores, which includes the results of the retail stores for Gap, Old Navy, and Banana Republic, and Direct, which includes the results for its online brands, both domestic and international. GPS has franchise agreements with unaffiliated franchisees to operate Gap and Banana Republic stores in many other countries around the world.

On September 8th, 2011 GPS opened their first Banana Republic store in Russia. Also, they have plans to close over 100 stores by the end of 2013. Wait, what? You may ask, How can that be a good thing? Well, watch the video below. They are just trying to reduce the square footage across all of their brands. On November 17th, 2011 GPS announced that its Board of Directors approved a new $500 million share repurchase program. Since January 1st, 2011 GPS has repurchased about 107 million shares for $2 billion, which is proof that they are committed to returning cash to their shareholders. When a company repurchases their stock it is a great sign that they believe in their brands/products.

I am not trying to pump this stock and make it something that it is not, but I do strongly believe in the Old Navy and Banana Republic brands. GAP is a winner regardless of whether it is out of style. Every Old Navy I've ever been to has been packed. Whether in PA, DE, NJ, CA, NYC or even in Washington DC, their clothes are economical and stylish. Gap Inc. is a diversified company with brands which hit each consumer's price points and fashion needs. Just wait until they conjure up a new brand which will send shock waves across the clothing apparel industry. They have the cash on hand to do just that.

During the past few years I have heard a handful of negative comments about Gap, Inc, however I don't believe it. Analysts can hate all they want on GPS, they just don't know how loyal their customers are. (I may sound like one of them, but honestly I'm more of a fan solely based on their dividend yield and share buybacks!) Yes, they may not make as much money as they used to, yet I believe in them. They sell clothing! Isn't that a necessity? Much like Waste Management, who picks up our trash, or Exelon, Duke Energy, AEP, HE etc., who provide us with electricity. These types of companies provide the world with things that we need versus what we want. It is true that one can go to another clothing retailer than Gap Inc.'s stores, but this company isn't going anywhere.

GPS is selling much too low at $17.30. Their cash flow is too impressive for that stock valuation. Currently, they are a market leader, however as the economy picks up each quarter will become more and more profitable. GPS continues to cut costs and we should begin to see a dividend increase. While reviewing GPS's financials over the past 12 months I have noticed that they are learning from their mistakes, taking steps to correct them, and expanding online and internationally. If you ask me, GPS is a rising star with good insider holding. Their balance sheet is exceptional and with the previously mentioned share repurchasing their stock price will go up, up, up.

Feel free to visit The Gap Inc.'s homepage, here, as well as their Investor Relations page, here. Also, watch the videos below. They are entertaining and provide a glipse into the company's culture. Until next time, reinvest those dividends within a Roth IRA. It's your best bet!