Spending more on marketing to jumpstart San Francisco-based Gap Inc.’s storied portfolio of brands isn’t key to CEO Richard Dickson’s plan.
The CEO offered several insights on the marketing playbook for Old Navy, Gap, Banana Republic and Athleta last week during the company’s quarterly earnings update. The big takeaway: marketing spend need not increase to get results.
The quarterly results said about as much.
Old Navy, Gap Inc.’s largest brand, saw comparable sales swing to growth of 2 percent in the quarter ended Feb. 3. That compares to a decline of 7 percent in the year-ago period. The division generated $8.2 billion in annual sales for the year ended Feb. 3.
The Gap brand notched a 4 percent comparable sales gain in the February quarter, up from the 4 percent decline in the prior year period.
Dickson told analysts Old Navy is beginning to see the early signs of a brand reinvigoration, with the broader business buoyed by improvements at Old Navy and Gap. The CEO also pointed to market share gains for the company as a whole across its stores, outerwear, sleepwear, pants and wovens.
“We have plenty of marketing investments, do not need to be spending any more and we’re going to continue to look for opportunities to be more efficient and see [if there’s need for additional spend] where appropriate,” Dickson said on last week’s call.
Art and Science of Demand
Gap’s “Linen Moves” ad campaign launched last month and features Grammy winner Tyla. It offers a good indication of where each of Gap Inc.’s other brands can go once they reframe their marketing strategies.
Gap, Dickson said, is “furthest along in this new [marketing] approach” involving use of social, influencers, streaming, linear media and stores.
“Places like Tiktok and Instagram are new platforms for Gap in the context of being more relevant to our consumer,” Dickson said. “‘Linen Moves’ is currently Gap brand’s highest performing video on both of these platforms ever. So early days. We’re encouraged with the momentum that we’re seeing. The playbook is in action and there’ll be a lot more to come.”
The strategy acknowledges the intricacies involved in marketing to today’s consumer, which the businesses have stumbled on in the past, the CEO said.
“Marketing is a much more complex function today than it was in the past, and our brands need to show up where consumers are, but they need to show up in relevant ways,” Dickson said. “The media mix to create relevant demand creation has changed vastly and we’re approaching it very differently than in the past. There really is an art and science to creating demand today, and Gap Inc.’s brands have been behind.”
Efficient use of marketing and media spend will be important.
“It’s really not about spending more; it’s about spending more efficiently,” Dickson said.
Zac Posen’s Influence
The company already made a big investment last month when it hired Zac Posen to serve as executive vice president and creative director of Gap Inc. Posen was also named Old Navy chief creative officer.
Posen will play a major role in the portfolio-wide brand revitalization.
“Zac is one of America’s most celebrated designers,” Dickson said. “His creative expertise, his cultural clarity has consistently evolved American fashion, making him really a great fit for the company as we engage our culture and look to reinvigorate our storied brands.”
Dickson went on to say Posen’s responsibility at Old Navy is to ramp the brand’s “storytelling.”
“His leadership across the portfolio will add a new dimension of relevance, and I’m really looking forward to Zac on the team and having him get immersed in our portfolio of our brands,” Dickson said.
That will be key considering Banana Republic and Athleta remain the laggards in the amount of work necessary to clear a turnaround.
Both brands stumbled in the February quarter. Banana Republic’s comparable sales declined 4 percent, worsening from the 3 percent decrease a year earlier.
Athleta comparable sales slipped 10 percent, widening from the 5 percent decline in the prior-year period.
In both brands’ cases, missteps on product and marketing have held back the businesses. Dickson sees opportunities for both.
Athleta, Dickson said, offers a “compelling brand platform” with “tremendous potential.” Meanwhile, Banana Republic’s 2024 playbook “will be about getting back to the basics, both for product and execution.”
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