Gap Sales Fall 5% at Flagship Brand -- WSJ
24 August 2018 - 5:02PM
Dow Jones News
By Khadeeja Safdar
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (August 24, 2018).
Gap Inc.'s struggles to revive its flagship brand continued in
the latest quarter as declining sales muted gains at the retailer's
other units.
Comparable sales at the company's flagship brand declined 5% in
the most recent quarter from a year earlier, sending shares down
6.6% in after-hours trading.
Chief Executive Art Peck called the performance unacceptable and
attributed the problems to an inventory backlog that he said the
company was working to correct. "We believe the worst is behind
us," he said on a conference call Thursday.
Companywide comparable sales increased 2% in the second quarter
from the year-earlier period. That includes Old Navy, which
increased 5%, and Banana Republic, which edged up 2%
Earlier this year, Gap Inc. parted ways with the leader of its
flagship brand, Jeff Kirwan, and gave the job to Neil Fiske, who
previously worked at Billabong. Mr. Peck said the company is still
working to clear inventory at the brand and expects to see
improvement later in the year.
Several executives have tried to revive the Gap brand, but
wardrobe basics have evolved since its heyday. In recent years, the
brand has lost market share to fast-fashion rivals like Zara. Old
Navy, the company's budget brand and biggest division by sales, has
been a bright spot, helping to shore up companywide results even as
Gap has struggled.
Gap brand needs to revamp its product offering, said Neil
Saunders, managing director of GlobalData Retail. "While the market
is moving forward, Gap is, at best, standing still," he said in a
note on Thursday. "That the brand cannot deliver, even over a
period of very robust consumer spending, is evidence that it is
still broken."
Buoyed by rising wages and employment as well as tax cuts,
Americans are spending more on products as diverse as jeans,
handbags and wall paint. The rising consumer confidence has
translated to better sales at several retailers.
Mr. Peck said he has made improvements on the company's supply
chain and is rolling out initiatives like a loyalty program that
can be used across brands, technology to help store staff replenish
inventory and a service that lets customers buy online and pick up
in the store. He is adding plus sizes in Old Navy, in a bid to
attract more customers.
Mr. Peck said his plan to remodel stores is paying off,
providing a sales lift. In the past year, the company has opened
more Old Navy and Athleta stores, while closing some Gap and Banana
Republic stores, leaving it with more than 3,000 locations. "The
simple fact is, is that most apparel is still sold in stores and
will continue to be sold in stores," said Mr. Peck.
Write to Khadeeja Safdar at khadeeja.safdar@wsj.com
(END) Dow Jones Newswires
August 24, 2018 02:47 ET (06:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
Gap (NYSE:GPS)
Historical Stock Chart
From Apr 2024 to May 2024
Gap (NYSE:GPS)
Historical Stock Chart
From May 2023 to May 2024