Advertiser Disclosure

advertising disclaimer
Skip to main content
Retail store

Gap Projects Strong Sales Growth in 2021: Is It Good News for Investors?

Apr 03, 2021 by Maurie Backman
Get our 43-Page Guide to Real Estate Investing Today!

Real estate has long been the go-to investment for those looking to build long-term wealth for generations. Let us help you navigate this asset class by signing up for our comprehensive real estate investing guide.

*By submitting your email you consent to us keeping you informed about updates to our website and about other products and services that we think might interest you. You can unsubscribe at any time. Please read our Privacy Statement and Terms & Conditions.

As was the case for many retailers, 2020 wasn't exactly a strong year for Gap (NYSE: GPS). The coronavirus pandemic hurt a lot of retailers as stores were forced to close early on and a sluggish economy kept consumers from spending.

But while Gap's recent fourth-quarter sales came up shy compared to Wall Street estimates, the retailer does think net sales will increase in 2021. That's good news for real estate investors at first glance. If Gap sees strong sales growth, it could be enough to prevent the company from shuttering stores out of desperation. But Gap's positive projections don't tell the whole story.

A shift to online sales

While Gap didn't exactly have a banner year in 2020, its online sales rose 49% during the fourth quarter, representing 46% of net sales during those three months. In fact, Gap is so confident its digital sales will continue to boom that it's sinking $140 million into opening a giant warehouse in Texas to facilitate the distribution of goods.

But that's actually not a great thing for malls and shopping centers. Gap has made it clear that it intends to sink more resources into supporting digital sales, all the while closing down store locations that have underperformed in recent years. For the most part, that change impacts Gap and Banana Republic stores, which haven't done as well as its Old Navy and Athleta brands.

If Gap continues to invest in warehouse space and replace stores with distribution centers, it could constitute a serious blow to malls. Malls have been steadily losing tenants for years, and the pandemic has only accelerated that trend. Not only have traditional retail locations shuttered, but department stores have also been dropping like flies, causing malls to lose the anchor tenants they so heavily rely on.

Losing Gap stores will also hurt shopping centers, which, like malls, have their own share of vacancies to grapple with in the wake of the pandemic. Gap is one of several large retailers that's sought out off-mall locations in an effort to draw in customers and avoid the competition that comes with being situated inside a mall with 72 other shops nearby. But if online sales continue to dominate, we could see more stand-alone stores disappear as well.

Of course, Gap isn't the only retailer to enjoy a boom in digital sales during the pandemic. Many consumers shifted to online shopping when the coronavirus outbreak got really bad, and that was clearly reflected during the holiday season.

The Millionacres bottom line

As coronavirus vaccines roll out to the public, customers may seek to return to physical stores. But those used to ordering goods online may choose to continue even once the pandemic passes. And if consumers on the whole favor e-commerce in a post-pandemic world, Gap won't be the only retailer to increasingly sink money into distribution centers -- at the cost of the physical stores that malls and shopping centers rely so heavily upon.

Unfair Advantages: How Real Estate Became a Billionaire Factory

You probably know that real estate has long been the playground for the rich and well connected, and that according to recently published data it’s also been the best performing investment in modern history. And with a set of unfair advantages that are completely unheard of with other investments, it’s no surprise why.

But those barriers have come crashing down - and now it’s possible to build REAL wealth through real estate at a fraction of what it used to cost, meaning the unfair advantages are now available to individuals like you.

To get started, we’ve assembled a comprehensive guide that outlines everything you need to know about investing in real estate - and have made it available for FREE today. Simply click here to learn more and access your complimentary copy.

Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.