Inventory mistakes like this, along with the costs of Gap's global expansion and a looming slowdown in consumer spending, are what have Mr. Market so worried about Gap. He put the shares on the bargain rack, where they're half off last year's price. Gap's current financial pressure hides the potential profit power of its unusual apparel franchise. That's the bad news. As Gap's expansion slows and its new stores become more established, it can look forward to big growth in cash flow.
Gap is bound to make fashion mistakes.
Surely some of its new stores will flop. And if tomorrow I conclude I'm wrong about Gap, I would sell and put our capital in a better investment. But you won't hear a word about it from me. As you, my fellow shareholders, know, Berkshire has a longstanding policy against talking about trade. The McGraw-Hill Companies Inc. All rights reserved.