Limited Brands or VF Corp May Rescue Gap Inc.

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As we speak, officials from the famous investment bank Goldman Sachs (GS) are talking with senior managers behind closed doors about options for the failing clothing retailer. Just announcing that GS was hired, The Gap's stock (GPS) soared on hopes that it may be on the selling block.

The Gap tried to downplay the GS meeting as something of a normal relationship. Obviously, it is not normal since both of The Gap's main brands, Gap and Old Navy, have been failing for years. Banana Republic has been the only brand that managed to keep this sorry company afloat, if you can call it that.

This isn't news but what might be news to a lot of people is, who wants to turn Gap Inc. company around? A competitor? American Eagle and Abercrombie both have much better strategies and would drag their company down. Two companies have a vested interest in Gap stores, but in different ways. Limited Brands (LTD) and VF Corporation (VFC) might be the two top people at the Goldman Sachs door.

Why these two?

Limited Brands

I think Limited Brands is interested because they have taken past companies who were trying to find themselves and turned them into marketing machines. They bought Victoria's Secret in 1982 for $1 million, which was mainly a catalog company. Also something to keep in mind: top former Gap executives have also come over to Limited Brands. Diane Neal, president of Gap's Outlet brand, came over in October 2006 to become president of Bath and Body Works, a Limited Brands store. Limited Brands has also purchased retailers in the past.

Another company Limited Brands turned around was Abercrombie and Fitch. They purchased the company in 1988 after ANF was failing, much like Gap, and positioned the firm in their line of stores as a teen clothing retailer. The brand became so popular that it spun off on its own. Now, Limited Brands lacks that teen store, and with The Gap failing much like ANF, it is a match made in retail heaven.

VF Corp

As for VF Corp, this company loves to take failing brands and bring them back to light. For example, VF Corp revived these notables brand names: The North Face, Nautica, Jansport, Reef, and Lee Jeans corp. The Gap Inc. would be something brand new for VF since they don't manage too many stores, it would be revamping a brand. I predict they may show interest, but the fact is Gap Inc. has so many stores. VF might shy away.

Goldman Sachs will take a month or two getting the company ready for sale. The Gap Inc. is ready to buy, so watch out for Limited Brands to make a strong offer.

This guest post was written by Ryan Donnell.

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