Blog: Leonie BarrieGap results a rare retail bright spot

Leonie Barrie | 23 August 2013

What a difference two years makes. In the past couple of weeks major US retailers including Walmart, Target, Macy's and Nordstrom have all lowered their forecasts for the rest of the year citing sluggish sales, cautious consumers and general economic uncertainty. But for specialty clothing retailer Gap Inc it's a different story, with an upbeat outlook that represents a rare bright spot in the industry.

That certainly wouldn't have been the case until recently, but may at last signal that the changes put in place to breathe new life into the business are paying off. A shakeup of the North American management team, slashing its US store base, ramping up overseas expansion, speeding the response of its supply chain, and investing in new designs, better quality, and designer collaborations have all set it on the path to recovery.

Indeed, the company yesterday (22 August) said second quarter profit surged 24.7% to $303m as sales climbed 8% to $3.87bn. Comparable sales were lifted 5% thanks to 6% gains at Gap and Old Navy.

Another theory suggests Gap has also been one of the biggest beneficiaries of the troubles facing JC Penney, which has lost customers in droves thanks to changes introduced by former CEO Ron Johnson. It's no coincidence, says retail expert Howard Davidowitz, that the reputation of both retailers was built on their denim offer.

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