Home / Knowledge / News / Apparel/Garments / Fitch revises Gap's rating to negative from stable
Fitch revises Gap's rating to negative from stable
01
Mar '16
Fitch Ratings has revised the long-term issuer default rating for apparel marketer Gap Inc. to negative from stable and graded it 'BBB-.

The negative outlook reflects the continuation of weak operating trends across Gap's brands and Fitch's reduced confidence in the company's ability to drive flattish comparable store sales to resume EBITDA growth.

“Fitch expects 2016 EBITDA to be $2.1 billion, compared to $2.3 billion in 2015 and approximately 20 per cent below the $2.7 billion peak in 2013,” a Fitch press release revealed.

“As a result of EBITDA declines, 2016 adjusted leverage is expected to trend in the 3.5x range, above the 3.0x range seen during 2012-2014,” Fitch observed.

Gap is struggling alongside other mid-tier apparel retailers, as the industry has seen sales bifurcated to higher-end aspirational brands and lower-end fast fashion and off-price channels.

According to Fitch, the industry challenge is exacerbated by a lack of a strong product cycle and Gap Inc.'s inability to connect with customers with compelling and trend-right fashion.

Over the past year, Gap has fought through the additional headwinds of West Coast port labour disputes, a strong US dollar, management departures and unsupportive weather patterns.

“Some of these issues should provide tailwinds in 2016 but the benefits are expected to be mitigated by further industry and internal fashion concerns,” Fitch noted.

Gap's 'BBB-' ratings have been predicated on a number of credit positives, including strong cash flow, expense management, and real estate discipline.

“Gap is willing to address its cost structure, real estate, and cash flow generation, through 2015's closure of 15 per cent of North American Gap brand stores and 10 per cent reduction in 2016 capex,” the ratings agency again observed.

Fitch further added that the company is generally disciplined with regard to its capital structure, and as an example will pay down its recently issued $400 million term loan in 2016.

“Moreover, Gap has also been an innovator in omnichannel capabilities, which should support market share as shopping behaviours continue to change,” it informed.

These positives, however, have been mitigated by Gap's inconsistent success introducing new product lines across its brands.

Comps trends have been generally negative for the past two years, worsening to a negative 7 per cent in the fourth quarter of 2015 and weak comps have led to significant gross margin declines and a negative EBITDA trend. (AR)

Fibre2fashion News Desk - India

Must ReadView All

L-R Manish Singhai, COO, Peter England; Vinai Kumar Saxena, chairman, KVIC; Ashish Dikshit, business head, ABFRL and Anshu Sinha, CEO, KVIC while signing agreement. Courtesy: ABFRL

Textiles | On 24th May 2017

Aditya Birla & KVIC enter into a strategic partnership

Aditya Birla Fashion and Retail Ltd (ABFRL) and Khadi and Village...

Courtesy: Jabong

Apparel/Garments | On 24th May 2017

Jabong Mood Store redefines online shopping in India

Jabong, India's leading online fashion retailer, has launched the...

Apparel/Garments | On 24th May 2017

G-III Apparel enters into license agreement with PVH

G-III Apparel Group has entered into a multi-year license agreement...

Interviews View All

Abhimanyu Singh Rathore & Barbara Anna Kosiorek
Kannbar

‘Blending cultures is the true beauty of fashion, where one’s imagination...

Kaizad Hansotia
GetNatty

Competition is the best thing that can happen to a startup

Nitin Soni
Dolphin Jingwei Machines

Taxation policies need to be made simpler

Lynda Kelly
Suominen Corporation

Suominen Corporation is a manufacturer of nonwovens as roll goods for...

Marten Alkhagen
Swerea IVF AB

Marten Alkhagen, Senior Scientist - Nonwoven and Technical Textiles of...

Larry L Kinn
Suominen Corporation

Larry L Kinn, Senior Vice President - Operations Americas of Suominen...

Sanjukta Dutta
Sanjukta's Studio

<b>Sanjukta Dutta</b> creates unique garments by clubbing prints of...

Silvia Venturini Fendi
Fendi s.r.l

"Yes, my confidence and positive attitude are my strengths and should be...

Madhu Jain
Madhu Jain

She grew up in the walled city of Old Delhi, completed her studies, and...

Press Release

Press Release

Letter to Editor

Letter to Editor

RSS Feed

RSS Feed

Submit your press release on


editorial@fibre2fashion.com

Letter To Editor






(Max. 8000 char.)

Search Companies





SEARCH

news category


Related Categories:
May 2017

May 2017

Subscribe today and get the latest update on Textiles, Fashion, Apparel and so on.

SUBSCRIBE


Browse Our Archives

GO


E-News Insight
Subscribe Today and Get the
Latest News Update in Your Mail Box.
Advanced Search