Wed. Nov 13th, 2019

Banana Republic’s rental service gets mixed reaction from analysts

1 min read

Gap Inc.’s

GPS, -4.96%

plan to launch a rental service for its Banana Republic brand is getting mixed reactions from analysts, with GlobalData Retail’s Neil Saunders saying he “doesn’t think much of the initiative.” Gap said last week that Banana Republic would launch Style Passport, an online rental service that will cost $85 per month. “For a brand of Banana’s price and position, we do not see rental as the right solution and believe the company would be better advised to continue focusing on developing compelling products and rebuilding its reputation,” said Saunders. On the other hand, Cowen analysts led by Oliver Chen say it “can be an exciting way to engage both new and loyal customers,” and might even be extended to other brands in the Gap portfolio if it proves successful. Cowen rates Gap stock market perform with a $22 price target. Gap discussed its more pressing issues on its earnings call, including traffic issues and product missteps at Old Navy, which will soon be spun off into its own business. Gap reported a second-quarter sales miss. Shares are down 4.8% in Friday trading amid a broader slump that’s bringing down stock in Nordstrom Inc.

JWN, -4.75%

(down 5.1%), American Eagle Outfitters Inc.

AEO, -4.17%

(down 4.3%) and Ralph Lauren Corp.

RL, -3.96%

(down 4.8%), among others. Gap shares have lost nearly 48% over the past year while the S&P 500 index

SPX, -1.88%

is up 0.4%.

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