Gap'S Weak Brand Business Will Reduce Its Annual Savings By About $25 Million At The Beginning Of 2016.

U.S.A

company

The group has been negative recently. Not only did the group's top brands leave, but also the third quarter profit forecast was further lowered, which increased the 400 million dollar loan for repurchase shares.

All of these measures will make the Gap group's credit rating lower or lower.

The weakening trend of business will continue for the next 6-9 months because of the turnover of executives.

Fitch international Rating firm said that the recent changes in Gap group are "common concerns about current and future business trends."

Gap's "BBB-minus" credit rating reflects the strong free cash flow of retailers, but management fees and real estate regulations are limited and influenced by the new product line results.

In fact, the Gap group is at a critical juncture, at a non investment level or junk bond state.

If the company's debt is downgraded, it will have the opportunity to become more expensive in order to prepare funds.

Fitch international Rating firm pointed out that the gross profit margin of the company in the third quarter is expected to decline by 300 basis points over the same period last year, and it has decreased by 200 basis points and 100 basis points respectively in the second quarter and the first quarter.

Fitch added: "the decline in the beginning of this year is partly related to the strength of the US dollar.

The company believes that this is the result of clearing the high inventory and reducing prices.

Gap group has been constantly changing top management, including Old Navy Global CEO Stefan Larsson has left the company, pferred to Ralph Lauren group as chief executive officer, Banana Republic creative director Marissa Webb has removed the creative director's position, but will continue to serve as brand creative consultant.

The rating agency said: "the company does not expect any brand of Gap to have positive sales growth.

If Gap's brand stores do not improve at the same time, the weakness of Old Navy will have negative tax depreciation and profit before amortization.

In addition, the departure of Banana Republic creative director indicates that the weak trend of the business will continue at least in the next six to nine months, and the product line under her guidance does not resonate with customers. "

As for long-term loans to buy stocks, the rating agency said: "this is generally considered a negative decision for a company to increase leverage in difficult times."

Fitch international Rating firm emphasized that Gap group is expected to have "adequate liquidity" and improve profits before tax depreciation and amortization.

Even worse holiday sales or a lack of sales momentum in the 2016 spring series are likely to trigger negative rating prospects or downgrades.

Under the influence of the continued weakness of its brand Gap and Banana Republic and the cost of shop failure and layoffs, Gap Inc. group's second quarter earnings and sales continued to decline. By the second quarter of August 1st, Gap Inc. net profit fell 34% to 219 million dollars from 332 million US dollars a year ago.

Net sales fell from $3 billion 980 million last year to $3 billion 900 million, down 2% from the same period last year.

On the basis of fixed exchange rates, net sales in the second quarter of fiscal year 2015 were flat compared with the same period last year.

By sector, its brand Old Navy continues to maintain its leading edge, while Old Navy rose by 3%.

Gap fell 6%; Banana Republic fell 4%.

Comparable sales fell 2% in the second quarter, basically unchanged from the same period last year.

In the next few years, 175 Gap shops will be closed in North America, including 140 shops closed down this year and 250 layoffs, most of which are targeted at headquarters in San Francisco.

The Group expects annual sales losses of about $300 million to be related to store closures, and annual savings from 2016 will be reduced by about $25 million.