A: This decade has not been great to the 1980s and 1990s trendsetter.
- Taking short hops
- For many, loans for college pay off in trouble
- Highly effective savers develop a system for success
- Overfunding a 401(k) has tax consequences
- The savings game
- The Leckey file
- Getting started
- Spending smart
- Can they do that?
- Taking stock
- Roth IRA tax advantages can entice younger workers
- The week ahead
While the commercials remain hip and it is still profitable, the merchandise and atmosphere in its more than 3,000 stores consistently fail to excite customers as effectively as rivals Abercrombie & Fitch and American Eagle Outfitters.
Shares of Gap (GPS) are down 3 percent this year, following a gain of 11 percent last year and a drop of 16 percent in 2005. Earnings fell 35 percent in its fourth quarter that ended in January.
It is trying: Through partnerships with young fashion designers, the company recently launched its Design Editions collection of women's apparel in 100 stores and on Gap.com. It hopes this will help pinpoint what consumers want and help it fill stores with the right merchandise.
Another positive is a sales increase during the past year at its reconfigured Banana Republic, now emphasizing "accessible luxury" handbags, fragrances and an expanded line of shoes.
Nonetheless, same-store sales at Old Navy and Gap stores declined in its fourth quarter and its fledgling Forth & Towne chain for Baby Boomer women will close in June. There has been speculation Gap is one of a number of retailers that could be acquired, because private-equity firms and hedge funds favor companies with cash flow, low debt and real estate. But that is just speculation and there are no assurances for shareholders.
With a turnaround far from assured, Gap shares receive a consensus analyst rating of "hold," according to Thomson Financial. That consists of three "strong buys," four "buys," 12 "holds" and three "underperforms."
A search is under way for a new chief executive to replace Paul Pressler, the former Walt Disney Co. executive who left in late January after the retailer's dismal holiday season. Chairman Robert Fisher, son of Gap founder Donald Fisher, is interim CEO. The Fisher family owns one-third of shares outstanding.
There has been an exodus of executives, including Cynthia Harriss, former president of its Gap North American division. Marka Hansen, who directed Banana Republic's improvement, replaced Harriss.
Gap earnings are expected to decline 7 percent in its fiscal year ending January 2008 and rise 17 percent in the fiscal year ending January 2009. The company's projected five-year annualized growth rate of 12 percent compares to 14 percent forecast for the apparel store industry.
Q: Please give your opinion of Hartford Stock Fund. It has been so-so for a while. --V.S., via the Internet
A: It is not your father's Standard & Poor's 500 index substitute.
The broadly diversified fund that aims to beat that index has been co-managed since 2005 by Steven Irons, an eclectic stock picker, and Peter Higgins, a deep value investor.
Although it includes familiar stock names, it also places bets on stocks it simply finds interesting. Some of the more aggressive choices, such as XM Satellite Radio, Boston Scientific, Medtronic and EMC, have provided negative and positive surprises.
The $1.15 billion Hartford Stock Fund "A" (IHSTX) is up 14 percent over the past 12 months to rank above the mid-point of large growth and value funds. Its three-year annualized return of 11 percent puts it near the lowest one-third of its category.
"This is a pretty good fund with impressive managers that could be a core holding in an individual investor's portfolio," said Todd Trubey, analyst with Morningstar Inc. in Chicago. "The results show that its unusual picks can add spice to the fund on the upside, but even if they don't do well, they don't absolutely crush overall performance."
The portfolio has emphasized mega-capitalization stocks, but foreign, aggressive-growth and deep-value stocks have been added to the mix. The market cap stays within 15 percent of the S&P 500 and sector weightings don't diverge more than 5 percent from the index.
Higgins ran Dreyfus Midcap Value Fund for a decade with volatile but strong results, while Irons has been on the value team at sub-adviser Wellington Management for a dozen years. The duo recently relinquished their additional task of running Hartford Focus Fund, which will make it easier to focus more attention on this fund.
Financial services represent 20 percent of Hartford Stock Fund's portfolio. Other significant concentrations are health care, industrial materials and technology hardware. Largest stocks are General Electric Co., Citigroup Inc., American International Group Inc., Cisco Systems Inc., AT&T Inc., Bank of America Corp., United Parcel Service Inc., Medtronic Inc., UnitedHealth Group Inc. and Altria Group Inc.
Hartford Stock Fund has a 5.50 percent "load" (sales charge), minimum initial investment of $1,000 and annual expense ratio of 1.26 percent.
Q: I have never invested in municipal bonds before, but I am now in a higher tax bracket than I used to be. How do I know if munis are right for me? --C.N., via the Internet
A: A municipal bond is a debt security issued by a state, city or county to finance capital expenditures. It is exempt from federal taxes and from most state and local taxes, especially if you live in the state where the bond is issued.
Always run the numbers before investing. To determine whether a municipal bond is right for you, take the muni's yield and divide it by 1 minus your tax bracket, expressed as a decimal.
Let's say you're considering a muni yielding 5 percent and your tax bracket is 25 percent: You divide 5 percent by 0.75 (1 minus 0.25) and the equivalent yield on a taxable bond would be 6.67 percent. "Municipal bonds generally yield lower than other bonds because otherwise people would buy only munis," said Marilyn Capelli Dimitroff, a certified financial planner and president of Capelli Financial Services Inc. in Bloomfield Hills, Mich. "The idea is to find the municipal bond that offers you a better yield than an equivalent taxable bond."
Andrew Leckey is a Tribune Media Services columnist. E-mail him at firstname.lastname@example.org.