Gap’s woes “not so easy to fix”
Gap is "not close" to finding the right formula to turn around its namesake brand’s fortunes in the US
Gap Inc is "not close" to finding the right formula to turn around its namesake brand’s fortunes in the US market, an analyst believes.
In two notes on the clothing retail giant, Wells Fargo Securities questions whether new CEO Art Peck and senior management have yet found the secret to restoring success to the company’s most important brand.
"While those that look back only a few years might conclude this is a brand that lost its way in 2014 after a strong 2012/2013, a look back over ten years shows this is a brand that has been losing market share and mind share over a much longer period," Wells Fargo says.
"Against that backdrop, it may not seem as easy to fix."
The analyst points out that Gap brand’s North American space diminished by 20% between 2005 and 2014, with its store count down nearly 30%.
But it adds: "It wasn’t just because stores were closing that revenues declined – comps have been negative in eight of the past ten years.
"Despite closing its weaker stores, over this time period the ‘stronger’ store base that remained struggled to comp positive, and typically did not."
Wells Fargo calculates that traffic through Gap stores has reduced by nearly 50% over the past ten years, adding: "New CEO Art Peck has a laser focus on fixing Gap Brand, but they do not seem close to finding the right formula just yet."
In a second note, Wells Fargo notes elevated clearance levels at Gap, including a 50% off clearance event last weekend, and 40% off women’s full-price styles.
It writes: "We believe CEO Art Peck and new EVP of product design and development at Gap Brand Wendi Goldman face a daunting task of fixing the brand.
"Judging from what we have seen recently in stores, they seem to be digging themselves a deeper hole."
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