[ad_1]
The Gap was the coolest brand in retail two decades ago. He experienced the boom of the mall in the second half of the twentieth century and conquered everyone from teens to mothers to celebrities like Sharon Stone.
Gap has built its status on the sale of sweatshirts, turtlenecks and fashion clothing at great prices, while this model is under threat with more choices than ever on the market.
"They operated the day the chief merchant was king and only a select few had the right to dictate their fashion," said Simeon Siegel, a retail analyst at Nomura Securities. "Now anyone with an Instagram account has the right to comment on fashion."
Gap's executive director, Art Peck, admitted Tuesday during a conference call with analysts that the company thought it could solve its problems by adding more stores to its stores, penetrating new markets and increasing sales. . "We have sometimes crossed our fingers and hope that our problem will worsen," he said.
Not anymore. Gap understands that it's too big and will never be what it was.
The company presented Tuesday a new plan to aggressively close underperforming stores. Tearing off the bandage could mark a turning point for Gap and prevent it from disappearing completely.
The lowest performance of retail
The problems of the Gap brand also contrast with the positives of other sectors of society.
Sales at Old Navy, Gap's largest brand, increased 4% in the last quarter. Old Navy is building new stores and will make a $ 10 billion turnover in the coming years. Athleta, Gap's women's athletic sports channel, is also expanding and the company hopes to reach $ 1 billion in sales.
Old Navy, Athleta and Banana Republic account for nearly 70% of the company's sales, which represent nearly $ 16 billion, and are in great shape.
"Old Navy is a machine," said Wednesday Jefferies analyst Randal Konik, in a research note. "Athleta is a major vector of long-term growth."
But years of missteps and a changing business landscape have caught up with Gap's flagship brand.
Missed opportunities
"Management has lost track of its customers and its competition," said Wendy Liebmann, director of WSL Strategic Retail.
"They even cannibalized, selling so many styles of the same style to Old Navy and Banana Republic," she said.
Gap is struggling to empty his stocks.
It carries too much goods, including three times more highs than low and its prices were too high. Gap's merchandising and pricing errors weigh on its profitability because Gap has to resort to significant discounts to sell them.
"Gap's brand image is still dull and it does not bring anything new or exciting to the market," said Neil Saunders, managing director of GlobalData Retail. "The products are always the same and boring."
Jeff Kirwan, CEO of the Gap brand, resigned earlier this year. Gap replaced Kirwan by Neil Fiske, a former Billabong executive who helped transform Bath & Body Works.
Reduce to grow
Half of Gap's sales come from online channels and factory stores. Both of these divisions are growing and profitable.
But more than 1,000 flagship stores around the world, many in almost empty shopping centers, represent the other half of the business. By early November, Gap had nearly 800 stores in North America.
Peck believes that the current number of Gap stores is not profitable and he outlined plans to quickly close hundreds on Tuesday. Taking action, which he called "late," could save Gap up to $ 100 million and improve healthier stores.
"Many stores in the lower half of the fleet have continued to deteriorate over time," he said. "I strongly believe that we have been able to change the situation by offering a deteriorating customer experience, which has a negative impact on the health of the brand."
Gap acknowledges that he is too expansive and that his earnings have peaked. Analysts say the door closure plan could help it become a sustainable business in the long run.
"Not only should the closing of fragile stores eliminate significant losses, but it should also enhance the brand's position and allow management to focus on the most successful companies," Konik said.
A similar strategy worked for channels such as Ralph Lauren and Michael Kors. Both countries have significantly reduced their inventories, but this has paid off as lower prices have led to higher prices, said Siegel.
"The biggest brands realize that you can be healthier if you are smaller," he added. "Profits can increase if sales go down."
Wall Street liked the sound of a new, smaller Gap. Gap's share price rose 5% Wednesday.
Source link
