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The Gap or Abercrombie & Fitch: Who is more tragically hip?

This post is part of our Battle of the Brands feature. Let us know which brand you prefer, and watch out for more Battle of the Brands posts.

Every time I walk through a mall (not too often these days), I see a new "hip" store of which I was previously unaware. I can always count on a few mainstays, though ... the cell-phone-accessory kiosk manned by overly enthusiastic employees, the tantalizing aroma from Auntie Anne's pretzels, and the always tasteful novelty shops. In most malls, I can typically scope out the latest yuppie fashions in either Gap (NYSE: GPS) or Abercrombie & Fitch (NYSE: ANF) (and often-times both). Despite the encroachment of Hot Topic (NASDAQ: HOTT), Pacific Sunwear of California (NASDAQ: PSUN), and other trendy competitors, these two venerable names have stood the test of time, providing relatively affordable threads for men, women, and kids.

In addition to its eponymous chain, which was started in 1969, GPS runs the Old Navy and Banana Republic chains. The retailer's most recent experiment, Forth & Towne (created to appeal to thirty-something career woman) was a bust and has now been abandoned after 18 months. Same-store sales trends have turned south of late, dropping five percent in fiscal year 2005 and slumping seven percent last year. And during the past 12-month cycle, GPS has seen its quarterly earnings drop more than 35 percent. The stock is well off its highs, having lost two-thirds of its value since early 2000. With technical resistance bearing down in the form of the equity's 10-month and 20-month moving averages, relief might not be in sight for a while.

Continue reading The Gap or Abercrombie & Fitch: Who is more tragically hip?

Starbucks vs. Dunkin' Donuts: The Story of Ralph and Serge

This post is part of our Battle of the Brands feature. Let us know which brand you prefer, and watch out for more Battle of the Brands posts.

I took my son to his spring-break baseball camp this morning in Lakeland, Florida. After dropping him off I drove past a Dunkin' Donuts: Hey I worked out yesterday -- I'm going in. I had a nice conversation with the clerk, Ralph. Ralph, I ask, do your customers ask you for a choice of coffee flavors? Ah, no, he says, just small, medium and large. Wanna a donut, they're fresh? Sure, I ask for a chocolate glazed, please, with a medium coffee. Do you sell CDs or popular, theme-oriented books here? Huh? No, he says, just the donuts and three coffees: small, medium, or large. The guy in line behind me urged me to hurry up -- he was hungry. I moved out of the way as he ordered four different donuts. Being a social kind of guy, I asked him if he was going to a meeting and bringing the goodies? No, he says, these are for me, my breakfast. OK, I got that.

Dunkin' Donuts and Starbucks: Milk and sugar vs. non-fat lattes. The success of the two is enviable, yet their customer base is quite different. Dunkin' Donuts serves, in general, millions of blue-collar workers with scrumptious, made-that-morning donuts in several varieties. The coffee is actually quite good, but Dunkin' Donuts is not known for its ambiance or as a place to sit and work on your laptop. It's buy the donuts, thank you, and move on. The donuts are delicious and addictive. My guy Ralph even suggested they need a rehab facility for Dunkin' Donut addicts. He explained that he has about 350 regular customers. He defined regulars as "people that are in at least four or five times per week, every week. I even know their vacation schedules!" Now, that's loyalty.

Continue reading Starbucks vs. Dunkin' Donuts: The Story of Ralph and Serge

Behemoth vs. Rising Titan: Wal-Mart and Target

This post is part of our Battle of the Brands feature. Let us know which brand you prefer, and watch out for more Battle of the Brands posts.

America use to have the battle of Sears vs. Kmart back in the 1970s and 1980s. Well, both are now combined into one entity named Sears Holdings Corp. (NASDAQ: SHLD) which, frankly, is still struggling for its identity. The new king of the hill from a revenue perspective is Wal-Mart Stores Inc. (NYSE: WMT). No question, with revenues this fiscal year ending January 31, 2008, expected to be $380 billion, Wal-Mart is the behemoth. The largest retailer in the world, period. But I wouldn't touch the stock. The comment most attributed to Wal-Mart is "it's tired." The stores look worn and the shopping experience arises more out of necessity than desire. Also, with a $200+ billion market capitalization, moving the needle even just 10% is quite challenging.

Why bother with a company that will have a very difficult time growing its revenue and earnings base? Why bother with a company that is being attacked, successfully, on both sides of its key businesses: the discount retailer and the warehouse stores? Why bother with a concept that has saturated its market with more than 3,200 stores in place? The only sure-fire way to grow the earnings base is through same-store-sales monthly increases, and yet, Wal-Mart is struggling in this capacity. The answer is not more stores, and pricing increases go against the Wal-Mart credo of everyday low prices. Sure, shareholders of the past 30 years have been exceptionally rewarded and Wal-Mart is the quintessential American brand, but there is a far better and exciting story for shareholders going forward. That story is the rising titan, Target Corp. (NYSE: TGT).

Continue reading Behemoth vs. Rising Titan: Wal-Mart and Target

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Last updated: May 27, 2012: 08:21 PM

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