US: Gap strategies under review as sales stay sluggish
Apparel retailer Gap Inc is reviewing strategies for its Gap and Old Navy chains after another set of dismal results.
The company has also slashed its full-year profit forecast after December sales disappointed. It now expects earnings of between 83 cents and 87 cents per share compared to the previously predicted US$1.01 to $1.06 per share.
Same-store sales were down 8% during the month on forced markdowns at the Gap and Old Navy units as shoppers failed to be won over by the choice of apparel.
Total net sales fell 4% during December to $2.34bn compared to the $2.44bn recorded a year ago.
At Gap North America, same-store sales fell 9% compared to a 10% decrease last year but at Banana Republic North America sales inched up 2% compared to last year's 5% dip.
At Old Navy North America, meanwhile, sales dropped 10% - static from last year - and international sales plummeted 8% compared to last year's 3% fall.
"Although Banana Republic continued to make good progress in its turnaround, we continued to experience negative traffic trends at Gap and Old Navy," said Sabrina Simmons, senior VP of corporate finance.
"Given the weak traffic trends, we needed to take significant action on promotions and markdowns at these two brands which drove Gap Inc's overall merchandise margins significantly below last year. We expect continued margin pressure into January as we work to clear remaining holiday product at Gap and Old Navy."
Gap's president and CEO Paul Pressler added that the company was disappointed with the year's performance.
He said: "Given that we did not gain the traction we had expected, the management team, with the active involvement of our board of directors, is currently reviewing Gap and Old Navy's brand strategies. We are committed to making the necessary changes to improve performance."
Year-to-date net sales of $14.75bn decreased 2% compared with net sales of $15.07bn for the same period last year. The company's year-to-date comparable store sales decreased 7% compared with a 5% decrease in the prior year.
Goldman Sachs analyst Margaret Mager said in a research note recently: "Gap continues to face fundamental structural challenges that stem in large part from its size and positioning.
"The company is being squeezed by smaller and more nimble specialty competitors on the one hand, and lower-cost big box retailers selling high-quality basic fashion apparel on the other. We view these challenges as secular and do not expect them to dissipate."
Furthermore, she called recent expressions of confidence by Gap officials about their merchandising "misplaced".
The company had promised investors they would see a turnaround in the second half of the year after ongoing poor results.
But Gap, which has lost favour with its once-devoted customer base, has admitted its recovery will take some time.
Strategies employed to tackle this have included aggressively clearing lines and ramping up marketing and stores spending.
Earlier this month Gap Inc reported the latest in a series of same-store sales declines, sparking speculation about the departure of Paul Pressler as Gap CEO and even a possible sale of the company. I...
San Francisco-based retailer Gap is scrambling to shore up its business after years of flagging sales. The firm's recent decision to hire Goldman Sachs to study turnaround options has raised speculati...
Inditex has dispatched an executive team to Lima, Peru, to look at claims that Topy Top - a supplier of garments for its Zara and Pull & Bear fashion chains - is promoting sweatshop working conditions...
San Francisco-based Gap Inc has lined up a series of franchise deals with retailers in Saudi Arabia and Turkey....
Same-store sales at Gap Inc fell 3% in May following a mixed response to summer merchandise across all its brands....
US fashion chain Gap has drawn up plans to axe 90 jobs at the company's European headquarters in London, according to a report in the UK press....
South African retailer Stuttafords has been ordered to halt sales of the Gap Inc brand, following a high court verdict in the country....
Gap Inc said late Thursday (24 May) that its first quarter earnings fell 26.4%, but managed to exceed consensus estimates....
- Why do modern robotics elude sportswear makers?
- Traditional financing is a misfit for fast fashion
- Trump trade policy – Who knows what he'll do?
- Planning is key to an effective inventory strategy
- How would end of NAFTA affect US apparel industry?
- US Q3 in brief - G-III Apparel, Express
- Bagir exports first trousers for H&M from Ethiopia
- Film documents Cambodia garment workers' stories
- Esquel efficiency drive continues to boost brands
- Pakistan suspends India cotton imports
- Outdoor performance apparel 2016: A broader perspective
- Global market review of lingerie – forecasts to 2022
- Global apparel markets: product developments and innovations, October 2016
- Footwear Top 5 Emerging Markets Industry Guide_2016
- REPORT BUNDLE: Africa-Med, Southeast Asia and Central America strategic sourcing pack