Gap (GPS) Partners With Pendleton, Gears Up For Fall 2016

It looks like The Gap, Inc. (NYSE:GPS) is all set to embrace the fall season, which is evident from the company’s latest announcement of a partnership with Pendleton Woolen Mills for this high selling period.

While Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products for men, women, children and infants, Pendleton Woolen Mills is an American textile company primarily renowned for its superior-quality woolen clothes and blankets.

As part of the aforementioned collaboration, Gap and Pendleton will introduce a limited-edition range of clothes and accessories for men, women, kids and infants, which will combine the popular styles of two of the most popular American names. The collection, which will hit select Gap global stores and its website this month, will bring Gap’s favorite denim collection together with Pendleton’s signature plaids.

Management at Gap believes that the union of the two iconic brands is likely to be a hit, as both of them are a major part of American wardrobes, emphasizing their popularity. Thus, Gap’s limited-edition collection for Fall 2016 is expected to be a perfect combination of the two classics. We believe that this will give a boost to Gap’s top line.

Gap has been struggling with waning sales for over a year now, mainly on account of adverse foreign currency movements, sluggish traffic and persistent weakness across its Banana Republic and namesake brands, partially mitigated by Old Navy’s decent performance. Further, stiff competition from fast-growing fashion retailers and a speedy shift in preference to online shopping have been hurting Gap’s growth.

Nonetheless, management recently chalked out various strategic plans to keep track of the accelerated pace of change in the apparel industry. The company intends to expedite its transformation plan by bringing meaningful changes to its product portfolio and operating capabilities globally. In this regard, management plans to focus on growing Gap’s brands in regions that offer greater structural advantage and potential to expand market share, while closing underperforming stores.

Additionally, the company remains keen on streamlining its operating model by creating a more proficient global brand structure, which will enable its brands to utilize scale advantages more efficiently. Clearly, the company remains committed to positioning itself better for long-term growth by setting its priorities right and channelizing resources accordingly.

We believe that Gap’s efforts to accelerate top-line growth by undertaking partnerships like the aforementioned one, along with the successful implementation of these strategic plans might bring this Zacks Rank #3 (Hold) company out of the woods.

Stocks to Consider

Better-ranked stocks worth considering in the same industry include The Children's Place, Inc. (NASDAQ:PLCE) , Tilly's, Inc. (NYSE:TLYS) and Urban Outfitters Inc. (NASDAQ:URBN) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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