The Gap Falling Into Better Times?

Aug 17, 2012 8:10am

Morning Business Memo

The Gap has been slumping for years, but better times may be ahead for the clothing retailer that runs Old Navy, Banana Republic, and the Gap. Corporate profits rose 29 percent in the latest quarter for the San Francisco-based company that has struggled to reclaim its fashion status. The latest results offered more confidence that a comeback, begun early this year, is taking hold. The company stepped up its marketing and this spring and summer pushed trendy clothing like brightly colored jeans. Gap has been expanding in other countries as it plans to close a third of US Gap stores by the end of 2013. The company plans to maintain its Old Navy stores in North America, but make them smaller.

The stock market is close to its highs for the year. The S&P 500 – the baseline index for many 401(k) funds – is just shy of the high mark reached in early April. The big stock index has rallied more than 5 percent in the past three weeks. Stocks rose yesterday. Asian stocks closed up overnight. Not much changed for the futures this morning… With the rise in stocks, a drop for bonds. Yields have been moving higher. The 10-year treasury close to 1.85 percent. Mortgage rates have started inching back up after recent record lows.

Facebook shares plunged to a new low. CEO Mark Zuckerberg now admits the loss in stock value may be painful for employees and investors . The stock dropped 6 percent yesterday to just below $20 a share. That’s down nearly 50 percent from the offering price of $38. More shares came on the market yesterday as the lock up period expired allowing some insiders to sell. A new wave of shares could be offered for sale by Facebook employees over the next few months.

Problems for public pension funds, the Washington Post reports: “Already-strapped state and local governments are coming under increasing pressure to reduce pension benefits or increase taxpayer contributions that help pay for them because of new rules that would require them to report those obligations more honestly, advocates say.” Moody’s will issue new bond rating rules at the end of this month. The Post reports “they are projected to triple the gap between what states and municipalities report they have in their funds and what they have promised to pay out to retirees.”

Richard Davies Business Correspondent ABC NEWS Radio twitter.com/daviesabc

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