Gap – the brand – is floundering internationally, with sales down 50 per cent in the first quarter, a rate far worse than other mainstream apparel retailers in the wake of the Covid-19 crisis.
Gap Inc, its parent, reported a US$932 million net loss for the three months to March on sales down group wide by 43 per cent to $2.11 billion. That decline was worse than its peers Abercrombie & Fitch and Urban Outfitters, and even budget-positioned multi-brand apparel retailer Kohl’s.
Neil Saunders, MD at GlobalData Retail, said one of the reasons for Gap the brand’s dire performance was a complete failure to transfer lost store sales online.
“At a time when other retailers were almost doubling their online revenues, Gap’s e-commerce sales dropped by 5 per cent,” said Saunders. “We believe that this is indicative of the brand’s lack of traction with customers and its inability to stimulate loyalty. It aptly demonstrates that a fair proportion of sales are driven, not by a burning desire to visit and buy from Gap, but from chance visits to stores and impulse buys often stimulated by excessive discounting. As soon as stores are closed, Gap drops off the radar and consumers have neither the will nor inclination to shop the brand online.”
Sales at Banana Republic fell by 47 per cent globally and by 50 per cent in the US, with online sales down modestly. However, Saunders said the dynamics of that are more excusable as Banana Republic is exposed to the smart casualwear sector which is heavily dependent on demand from office workers, who have been stuck at home for many weeks in most western markets.
In stark contrast, sales by its sportswear brand Athleta, fell by just 8 per cent, with store sales down 50 per cent and online sales up 49 per cent. Old Navy’s global net sales fell 42 per cent, with store sales down 60 per cent and online sales up 20 per cent.
CEO and president Sonia Synga trumpeted a quick pivot to e-commerce resulting in 40-per-cent growth online in April and 100 per cent in May across all of the group’s brands, the first two months of the new quarter. “This online momentum, enabled by new omni-capabilities that have expanded the way customers can shop with us, leaves us well-positioned to fuel our brands going forward,” she said.
Meanwhile, Saunders said the “heart and soul” of Gap the brand’s problems stem from its “anemic” ranges.
“These are bland and undifferentiated and do nothing to stimulate consumers. Against a market saturated with alternative apparel destinations, this simply isn’t good enough. Gap has been aware of this problem for an eternity but has consistently failed to act, either because it is too inert to do so or because it is unsure of how to correct the problem. In fairness, recent management changes may be the remedy to this, but the crisis has interrupted any progress than might have been made.”
He said that before the advent of the pandemic, Gap Inc was in a weak position. “It emerges even more withered with quite a lot of holes in its strategy. Solid brands like Athleta provide some hope but are too small to make up for the problems elsewhere. As such, Gap now needs to reinvent and refocus its efforts with an urgency that is unparalleled in its history.”