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Competitors
Competitors
Below are the competitors that have been chosen to be compared to GAP Inc. The four companies below all sell similar products related to the retail industry with relative prices as well as products with Burlington being the company with products on the cheaper end. The companies all have similar Market Caps with Stock Prices that are all relative to the size of their company
Market Cap: 7.29 billion
Stock Price 2/27/2024: $19.66
Market Cap: 4.79 billion
Stock Price 2/27/24: $24.27
Market Cap: 4.37 billion
Stock Price 2/27/24: $47.06
Market Cap: 13.31 billion
Stock Price 2/27/24: $206.25
Market Cap: 6.43 billion
Stock Price 2/27/24: $127.63
Profitability Metrics
Profitability Metrics
Gross Profit Margin & Operating Margin
Gross Profit Margin & Operating Margin
Figure 1: Gross Profit Margin for GAP Inc. and other Competitors in the Appeal Retail Industry Source: S&P Capital IQ
Figure 2: Operating Margin for GAP Inc. and other Competitors in the Appeal Retail Industry Source: S&P Capital IQ
Gross Profit Margin
Gross Profit Margin
Above in figure 1 shows the gross profit margin for the last 3 years for GAP Inc., 3 competitors as well as the apperal retail industry average. It can be seen that Abercombie has the highest gross profit margin. This means that they either a) have lower cost of goods sold then their competitors or b) have more sales than competitors. It is a mixture of both. They focus mainly on their brand position and a focus on premium materials, design, and exclusivity which allows them to charge a higher price for their products. Abercombie is the only company to stay above the industry average for the three years. GAP's gross profit margins are steady around the 35-40% over the years. They are not as high as Abercombie's gross profit margins because they have a broader marketing position which targets a wider range of customers at a lower price range.
Operating Profit Margin
Operating Profit Margin
A common theme that we saw throughout the rest of our profitability ratios was during 2020 which was the height of the COVID-19 companies, many of these clothing retail companies suffered greatly because of the decrease of people spending. GAP Inc. during 2022 compared to all of the other companies was in the negative because of their operating income was in the negatives. 2021 was the most successful year for the appeal retail industry right after the end of COVID-19 and the number of sales dramatically increased.
Return on Assets
Return on Assets
Figure 3: Return on Assets for Companies and Apparel Retail IndustrySource: S&P Capital IQ
Return on Assets
Return on Assets
Because the total amount of net income was decreasing during COVID-19 because of households spending less money, the return on assets decreased substantially. During 2021, American Eagle had the highest ROA with the only company being above 10%. GAP Inc. ROA went into the negatives during 2022 because of the loss of Kanye West who had a substantial impact on the earnings for GAP Inc.
Return on Net Operating Assets
Return on Net Operating Assets
Figure 4: Return on Net Operating Assets for GAP Inc. and other Competitors in the Appeal Retail Industry Source: S&P Capital IQ
Return on Net Operating Assets
Return on Net Operating Assets
Return of Net Operating Assets is determined by taking the Average Net Operating Assets and dividing it by the NOPAT (Net Operating Profit After Tax) x 100. Over the past 4 years (2023 data was unreleased) GAP Inc. had pretty inconsistent RONA with it majorly falling during 2020 and 2022. This shows that GAP Inc. has struggled to create profits from their Operations which could show negative Operational Efficiency and not utilizing its assets to the best of it's ability.
DuPont Analysis
DuPont Analysis
Figure 5: Return on Equity for GAP Inc. and other Competitors in the Appeal Retail Industry Source: S&P Capital IQ
Return on Equity
Return on Equity
ROE is expressed as a percentage and is a key indicator of a company's profitability and financial performance. Burlington had the highest loss of 2020 and the most successful during the other 4 years. GAP Inc. on the other hand did not do too well with having a consistent ROE over the past 5 years but this past year 2023 being its highest right around 20% could show success in the future.
Figure 6: Net Profit Margin for GAP Inc. and other Competitors in the Appeal Retail Industry Source: S&P Capital IQ
Net Profit Margin
Net Profit Margin
The same issue still existed for the Net Profit Margin of the apparel industry during 2020 because of the height of the COVID-19 impact. GAP Inc. had a major partnership deal with Kanye West that ended in 2022 with GAP reporting a $49 million net loss during its second-quarter earnings during 2022. The industry average is at a much higher rate because there is a wide range of companies at different price ranges included in the appeal retail industry.
Figure 7: Total Asset Turnover for GAP Inc. and other Competitors in the Appeal Retail Industry Source: S&P Capital IQ
Total Asset Turnover
Total Asset Turnover
Total Asset Turnover is another important financial ratio that measures how efficiently a company uses its assets to generate sales. If a company has a lower-than-average TAT ratio it may lead a company to reevaluate its assets usage but if a company has a higher ratio it idicates a competitive advantage. Over the past 5 years GAP Inc. has been at the top or equal to the industry average for TAT. This is definitely a plus for the company but all of the direct competitors that are shown as well are all doing very well in comparison to each other meaning any of them could surpass each other in the near future.
Figure 8: Equity Multiplier for GAP Inc. and other Competitors in the Appeal Retail Industry Source: S&P Capital IQ
Equity Multiplier
Equity Multiplier
Equity Multiplier measures the portion of a company's total assets that are financed by it's Shareholder Equity. This allows for us to quantify the leverage and risk a company has. In Figure 8 we can see that Burlington is an outlier because of their extreme capital structure. GAP Inc. has been pretty stable in the Appeal Retail Industry over the past 5 years which means that they are using a comparable mix of debt and equity as other companies. Since they are not the lowest but not the highest it would not really put them at a major advantage or disadvantage during an economic recession.
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