San Francisco-based Gap Inc.’s oldest brand, and namesake, has shuttered hundreds of stores, grown online and recently saw market share gains in the October quarter. There’s still more work to do in restoring the brand and business.
The Gap brand has so far focused on what Gap Inc. President and CEO Richard Dickson told analysts Thursday has been a focus on improving the business’s core operations. Those tactics have so far involved closing stores, implementing a franchising model for its businesses in China and Europe, online expansion, improved in-store merchandising and a holiday campaign that launched last month.
“We recognize that we have been not as prominent on top of key trends and we need to market our core categories in a much more relevant and meaningful way. This is going to take time,” Dickson said.
The CEO joined the company in August after serving as president and COO of Mattel, where he was credited with breathing new life into the toymaker’s Barbie brand among others.
His update on Gap came after the brand generated net sales of $887 million in the fiscal third quarter ended Oct. 28. That was a slide of 15 percent from the year-ago period. If the impact of the sale of the company’s China business and end to the Yeezy Gap line are taken out, net sales were down 6 percent.
Women’s, kids and baby did well, while activewear began to see momentum from the prior quarter.
Ultimately, Gap same-store sales ended the quarter off 1 percent.
“The third quarter results do provide some really early proof points that our healthy core is showing signs of strength,” Dickson said. “We are going to continue to build upon this as we reignite the brand.”
Dickson said when it comes to product, Gap is working on getting the assortment “trend right” to deliver “not just on the needs, but also on wants” of the consumer.
Brand Reinvigorations, Portfolio Update
The Gap Inc. portfolio of brands all saw net sales declines in the recently ended quarter as the four work on turning around their respective businesses. Each is at different stages in those turnarounds.
“Brand reinvigoration is about driving both relevance and revenue,” Dickson said.
He added it’s still “early days” in implementing those plans to improve each division. Brand identities, on-trend product, better merchandising, omnichannel and marketing are points of focus across the portfolio.
“I’ve seen areas where our brands do this well, but I’ve also seen opportunities where they can do significantly better,” Dickson said. “It’s not enough to get it right in one or two of these areas. Effective brand reinvigoration is about getting it right holistically and consistently.”
Elsewhere in the Gap Inc. portfolio, the Old Navy division generated net sales of $2.13 billion, down 1 percent from a year ago. Same-store sales rose 1 percent in the quarter.
Banana Republic net sales slipped 11 percent in the quarter to $460 million, with same-store sales falling 8 percent. Dickson said the company sees opportunity in the quiet luxury trend for Banana Republic.
Athleta battled product misfires, according to Dickson, and saw the largest decline during the quarter of 18% to $279 million in net sales. Same-store sales tumbled 19%.
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