Gap brand sales fell 7 per cent globally in the last quarter as the US apparel retailer fails to re-engage consumers.
However Gap Inc increased its overall sales by 6.5 per cent to US$4.09 billion on the back of solid growth in its Old Navy business and a modest 2 per cent improvement of the more upmarket Banana Republic banner. Net income rose to $266 million, up $37 million year on year.
“Old Navy is doing all of the heavy lifting while the Gap brand languishes,” observed retail analyst Neil Saunders, MD of GlobalData Retail.
“When it comes to Gap the numbers are particularly bad. Despite protestations from management that improvements to the range and inventory are coming through, we do not buy the story of recovery. Gap’s brand image is still lacklustre and it is not bringing anything new or exciting to the market. Products are still samey and boring and they are still being discounted because Gap is unable to sell them at full price.”
Saunders said the sales results testify to the deep-seated problems at the Gap brand – especially when they are delivered against the backdrop of a robust consumer economy in which people are spending more on clothing than they have done for many years.
“Our consumer data still shows that shoppers see Gap as bland and increasingly irrelevant in the apparel space. This is not healthy and it underlines the fact that Gap still has an enormous amount of work to do before it can even start down the road to recovery.”
In contrast, Old Navy’s fashion edits and the brand’s ability to put out well-curated collections are attracting the attention and spend of family shoppers.
“The strong economy is giving consumers a little more money to spend and we believe that Old Navy is benefitting from this as consumers buy more treats for themselves and their families. The strength of Old Navy’s brand is evidenced by the fact that all categories and channels have benefitted from growth.”
Gap Inc will end the year with a net gain of about 70 new stores, including outlets in Canada and Mexico, where the brand continues to perform well.
Banana Republic turns a corner
Meanwhile, Banana Republic achieved a 9.2 per cent uplift in US sales due to store openings and a 2 per cent increase in comp sales.
“The work to re-engineer the brand is paying off,” said Saunders. “Fall and winter collections were stronger than they have been for many years and there is now more cohesion between marketing and assortments. While the recovery remains in its early phases, Banana Republic is moving in the right direction.”
Overall, said Saunders, despite poor Gap brand sales figures, the business is in a reasonable state. “However, the ongoing issues at the Gap brand are raining on what would otherwise be a sunny parade.”