NEW YORK (
) -- It's a bit easier to fall into the
has been welcomed with much fanfare, and rightfully so. For years, Gap's fit was unflattering for many body types, appearing boxy and stiff.
But the 1969 jean -- in a bevy of fits, styles and washes -- is soft and comfortable. And although it bears price tags ranging from $54 to $69, it appears -- based on a visit to an undisclosed Gap store in New York this weekend by our
-- that shoppers are willing to pay a little more for the denim.
From what we've witnessed, the product, in select styles, is selling out both online and in stores.
Denim has been a key item for retailers, especially during back-to-school. Teen retailers like
American Eagle Outfitters
Abercrombie & Fitch
, have been offering enticing promotions on the American classic.
Even if Gap's "Born to Fit" campaign successfully lures shoppers back into stores, there is no guarantee they will shop the rest of the store.
Management knows this, and over the Labor Day weekend offered a 25% discount to shoppers when they purchased three items or more -- the hope clearly being that shoppers who are buying one or two pairs of jeans will then splurge on a sweater they wouldn't have otherwise bought.
But with prices for a women's cropped cotton cardigan at $69.50 and a men's shawl collar cotton pull-over at $68, was this discount enough for shoppers to turn a blind eye to high prices?
"Denim may be putting Gap back on the map as a fashion destination, but it's not having the halo effect on other merchandise categories management hoped," Needham analyst Christine Chen said.
Likewise, Stifel Nicolaus analyst Richard Jaffe notes, shoppers may pay moderate prices for a good pair of jeans, but for the same old sweater or t-shirt, they are usually more price sensitive.
In addition, denim only comprises 20% of Gap's assortment, so the only real way same-store sales will turn positive is if trends in tops and sweaters improve, Chen said. In August, Gap posted a 3% decline in same-store sales, surpassing the 7% drop analysts expected.
Analysts, on the whole, think Gap's momentum can continue, but attribute the company's mild success to the Old Navy chain, and not the company's namesake stores. Old Navy same-store sales in August rose 4%, while sales at namesake stores fell 7% and those at Banana Republic sank 8%.
Credit Suisse analyst Paul Lejuez upgraded the company on Tuesday to outperform from neutral, citing Old Navy's improvement. Lejuez expects 2009 profit of $1.48 a share and raised his stock price target to $28.
And on Friday UBS analyst Roxanne Meyer raised her price target and earnings per share, citing Gap's improved margins and growth at the Old Navy chain. Meyer now expects third-quarter earnings of 33 cents a share, and $1.36 a share for the full-year. She also raised her price target to $21 from $18.
Shares of Gap were up 1% to $21.40 in afternoon trading.
-- Reported by Jeanine Poggi in New York
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