CEO brushes off reports Gap is dead, dying or sick
Gap Inc.’s sales rose during the critical holiday period and the apparel chain said they could increase this year, bucking a slump that has plagued many mall-based retailers
The company said sales at stores open at least a year increased 2% in the quarter ended Jan. 28, the first quarterly increase since CEO Art Peck took over two years ago. The retailer, which has been closing dozens of weaker locations, predicted comparable sales to be flat or up slightly this fiscal year. “If you read the headlines today, you’ll see the words dead, dying, sick. We are none of those,” said Peck on a conference call to analysts on February 23, 2017. “We are healthy and strong and have a plan and clear direction.”
Under Peck’s leadership, the company has closed hundreds of stores, eliminated creative directors and expanded the role of outside vendors. The former management consultant has also been emphasizing the use of market-research data to monitor trends.
Peck attributed the improved results to enhancements in the quality, fit and aesthetic of products, as well as changes in the company’s supply chain. He said the retailer has streamlined its inventory management systems and is now buying more fabric ahead of time to react faster to consumer demand. “It really helps us to get the right product in the right place at the right time,” he said.
Gap’s overall results improved thanks in large part to sales growth at budget-brand Old Navy, which accounts for the largest chunk of sales. The brand had faltered in the aftermath of former leader Stefan Larsson’s departure in 2015, but regained its footing in recent months. For 2016, comparable sales increased 1 % at Old Navy, while falling 3 % at Gap brand and 7 % at Banana Republic.
Banana Republic has changed leadership amid a prolonged sales slump. Peck will oversee the brand, while a search for a new president is under way. He plans to “get into the business personally and understand what’s going on,” he said.
Some analysts have suggested drastic change. It is time for Gap to explore strategic alternatives for Banana Republic, including a potential sale or shutting down the brand, according to analysts at Jefferies.
The company plans to open about 40 more stores than it will close during the current year, primarily additional Old Navy and Athleta locations. During the latest quarter, the retailer closed 113 stores, ending January with 3659 stores.
Fourth-quarter profit rose 3 % to USD 220 million, or 55 US cents a share, including a USD 71 million charge against Intermix, the women’s fashion boutique it bought a few years ago. Meanwhile, sales rose 1 % to USD 4.43 billion.