Gap Inc. is jumping on the beauty bandwagon as it looks to capitalize on momentum set off by its two largest businesses in Gap and Old Navy.
The San Francisco-based company said Thursday it plans to launch beauty beginning with a test this fall at Old Navy stores. Some of those locations will have beauty shop-in-shops with dedicated staff.
Next year is when the company intends to expand beauty across the Old Navy store fleet in addition to rolling out the larger category assortments across its portfolio, which includes Gap, Banana Republic and Athleta.
“The beauty business is a phenomenally exciting business,” Gap Inc. CEO Richard Dickson said Thursday at the Goldman Sachs 32nd Annual Retailing Conference. “It’s one of the fastest-growing and most resilient categories in the U.S.”
Dickson went on to say beauty is high-margin business and also helps bring in younger shoppers.
“Small pockets” of beauty with Old Navy and fragrances with Gap in the past have been studied by the company and executives are now ready for a bigger push, the CEO said.
The launch at Old Navy makes sense. It’s Gap Inc.’s largest brand by revenue and has seen successes in areas such as denim and activewear.
Overall, Old Navy has managed to move faster with the trends, while still retaining its value proposition across men’s, women’s and kids.
The Old Navy division closed the quarter ended Aug. 2 with sales up 1 percent to $2.2 billion. Comparable sales also rose 2 percent.
A similar phased rollout is expected for accessories, a category Gap Inc. businesses are already in, but will see expanded.
“We already have a nice accessory business,” Dickson said. “Nice is nice, but we believe it could be much more important. Our customers want it.”
To his point, Dickson mentioned the collection of new bags launched at Old Navy, which start at $29.99 and include upscale crossbody, totes, clutches and shoulder bags.
Beauty Boom
Gap Inc.’s news comes a day after Macy’s Inc. reported better-than-expected results for its fiscal second quarter.
Part of the department store retailer’s sustained successes have been from its upscale boutique chain Bluemercury, which saw its 18th straight gain in same-store sales in the recently ended quarter, after rising 1.2 percent. Bluemercury’s net sales also rose by 3.3 percent.
Locally, there have been other success stories with beauty.
That includes Cerritos-based Revolve Group, which has consistently seen the category serve as a boon to its own business.
What About Athleta?
As Gap Inc. looks to new growth vehicles with most of its turnaround fully complete, the question of where Athleta is going remains.
Gap Inc.’s activewear brand remains the laggard of the portfolio, and the company’s acknowledged its progress won’t be an overnight success story. In fact, Athleta has stalled out in reset mode as its sister brands have notched gains.
Athleta had sales of $300 million in the recently ended quarter, which was a fall of 11 percent from a year ago.
Its same-store sales fell 9 percent in the quarter, compared to down 4 percent recorded in the year-earlier period.
While executives said the business would work to trim inventory and get back to its roots as a performance brand, it’s unclear how long that will take. More importantly, it’s unclear if there’s still appetite in the marketplace for Athleta.
The brand’s stumbles in attracting younger consumers with more trend-right product didn’t sit well with those who came to it for comfortable, high-performing fabrications. Not only will Athleta management have to tell a refreshed brand story to new consumers that have grown up on Alo Yoga and Vuori, but it will also have to win back those who wandered away from the brand into the arms of competitors.
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