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Thursday, 6 September, 2001, 14:33 GMT 15:33 UK
Gap warns on profits
Gap shorts advert
A summer slump in sales at the US fashion chain Gap has prompted the firm to warn that it will not meet its profits targets.

The company has already blamed the US slowdown - and a new breed of cost-conscious shoppers - for a 17% drop in sales last month.

But the firm has now owned up to a series of fashion mistakes, with its own management admitting that it began to fall out of step with changing consumer tastes more than a year ago.

The rapid fall from grace of the retailer, which has more than 3,881 stores, matches the rapid rise of its popularity and profitability during the 1980s.

But while the US stock markets must absorb the pain of another profit warning, there was at least some encouragement from the world's largest retailer Wal-Mart and general department store JC Penney.

Superstore success

The Wal-Mart superstore chain reported that August sales rose 7%, ahead of expectations.

And the firm says that it is on target for 4-6% growth during September.

Meanwhile, JC Penney said on Thursday that August sales at its department stores rose 7.5% from a year ago, boosted by back-to-school shopping.

Sales at JC Penney's Eckerd drugstore chain rose 8%.

The gains at the middle-of-the-road general stores suggest that Gap's problems are self-generated rather than due to the external factors of the economy.

Anti-globalisation

As well as losing its touch with the fashion world, Gap has also been targeted by anti-globalisation protesters over the past few years.

They allege that the retailer exploits labourers in the third world through the manufacture of its clothes.

The Gap group includes the Gap brand, as well Banana Republic and Old Navy stores in the US.

On Wall Street, Gap shares stood 18% lower at $15.50 in morning trade.

Wal-Mart stock was $0.95 lower at $48.20, while JC Penney shares were $0.67 stronger at $24.95.

See also:

22 Jun 01 | Business
Gap scales back
17 May 01 | Business
Gap profits sink by 51%
16 Aug 01 | Business
Gap hit by value-for-money trend
05 Mar 01 | Business
Amazon surges on Wal-Mart rumour
30 Aug 01 | Business
US consumers slow spending
23 Aug 01 | Business
US retail results poor
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