In the money: Gap puts global over local
Investments in new product designs and better quality - as well as marketing campaigns to bring shoppers into its stores - are starting to pay off for specialty clothing retailer Gap Inc. But the next step in its transformation is to become a truly global brand.
"We've been on a journey," CEO Glenn Murphy told analysts yesterday (15 November) on a conference call to discuss the retailer's third quarter results.
Efforts to move from the "American-centric" company of several years ago to a global brand structure have most recently seen the opening of the first Gap Outlet store in China and the launch of e-commerce in Japan.
But a management overhaul announced last month is intended to take this to the next level by putting "global over local."
Gap, which now has more than 3,200 stores in over 40 countries covering its five brands, is bringing together its North American, International, Online, Outlet and Franchise divisions under a single global executive for each brand from February next year.
Not only will this reflect the company's increasingly international footprint, but is also intended to drive long-term growth by enabling the retailer to respond more quickly to changing consumer tastes.
"Customers clearly are becoming more and more global," Murphy said.
"So from our perspective, looking at our business globally is very important; to have one lens, one management team looking at the brand across all different channels in all different countries.
"What we're expecting to get out of this change is speed, for sure, with one team deciding across every touch point we have to the customer. We're going to get more efficiency, which is critical."
The executive shuffle sees Stephen Sunnucks become Gap global president, based in New York, with Mark Breitbard taking on an expanded role as president of Gap North America.
At Banana Republic, Jack Calhoun will be global president, while Julie Rosen takes responsibility for the brand's North America performance. And Stefan Larsson is global president of Old Navy.
Meanwhile, Art Peck takes on the position of president of the newly formed Innovation, Digital Strategy and New Brands Division, and will also take charge of the Athleta and Piperlime brands.
"You will see now a much more consistent approach in our assortment around the world," Murphy said, adding that there will still be room for local opportunities.
"Instead of an inch deep and a mile long, [the teams] will be able to go an inch wide and a mile deep on what really differentiates Japan from China, from Europe, from some of our key franchise markets."
"Ready to compete and win"
Gap Inc yesterday said it was "ready to compete and win this holiday season," after a stellar third-quarter in which profit surged 60% thanks to higher sales of new and revamped product lines.
Net income in the three months to 27 October jumped to $308m, up from last year's $193m, while sales rose 8% to $3.86bn.
Significantly, revenue at stores open at least a year climbed 6%, with gains across the company's North American businesses. A rise of 7% was seen at Gap, Banana Republic was up 6%, and Old Navy surged 9%. But international comps fell 3%.
Murphy said the domestic gains were "product-led", with efforts to ensure clothes across multiple channels have "more of a wear now approach" and bridge the transition seasons between summer and autumn, and winter and spring.
The third quarter "was much better executed in that transition of product, and that's why our comps were strong in August and September," he said.
"And lastly, we had very good regular price selling," on more products online and in stores. "It's a metric we're watching closely and does talk about long-term health of the brand."
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