Is Gap’s comeback happening yet?
The retailer, which has been promising a turnaround for a while, has consistently pinned Spring 2016 as the moment that we would see major changes.
Gap Inc. CEO Art Peck had reinforced on multiple earnings calls that the company was working on a comeback.
Sales have been plummeting; for fiscal 2015, comparable sales for the store had sunk 6%, compared to -5% for fiscal 2014.
But now, it’s Spring 2016, the moment the company had been waiting for, and sales still aren’t up. For March, comparable sales were down 3%.
What’s taking the company so long to dig itself out of this hole?
For starters, the company’s seemingly endless promotions was a strategy to rid itself of the apparel consumers didn’t want — and that could be hurting the company’s profits.
“They were extremely promotional through [the fourth quarter], driving down inventory levels where it’s almost been an inventory reset,” Gabriella Santaniello, analyst and founder of A-Line Partners, told Business Insider. “The new product they’re bringing in is …. what comes to mind when we all think of Gap, which is really strong, solid core basics in multiple colours and with a great fit.”
These basics aren’t necessarily trendy — they’re not what you’d find at a Zara or even a Forever 21 — but it’s what Gap’s customers want, which is important to remember. Think: chambray shirt-dresses and blazers.
But even if the trends of Zara do not resonate with Gap’s core customers, it does have something that’s more pressing than ever: tight supply chains and speediness.
Gap’s trying, to say the least.
“They have really reworked the fit and they have gone into fashion but lightly, in a very understandable way for their customer.” She pointed out “you’re not really taking a major risk by purchasing anything at Gap.”
However, it’s crucial to note that the promotions aren’t entirely gone (and the wrinkled dress above shows that the company still has some work to do with presentation).
And sale section still looks a bit like a mess.
But the company needs some promotions; it can’t simply relinquish them. “You can’t just pull away from promotional activity because obviously you need a reason to come into the store,” Santaniello said.
Case in point: Gap advertises its promotions outside of its store, which is a mechanism to lure sale-hungry consumers into the store.
However, not everything is on sale — like some of its athleisure apparel. A passive aggressive sign had to remind people that no, not everything is always on sale at the Gap anymore.
Put it appears that passive-aggressive signage aside, the company is at least trying to play to its strengths, which is arguably denim.
Santaniello believes that it will take some time before we see a fully executed turnaround; people need to trust the brand again. This, arguably, could account for the brand’s March’s negative comparable sales.
“The question is sustainability,” she said, “and can they keep it up? Because I think when you are a company as large as Gap and you’ve struggled for as long as you’ve struggled,you definitely have a lot to prove. So people aren’t necessarily going to jump on board immediately; they just want to see it’s … not a fluke.” Further, even if Gap has pinned Spring 2016 as the magic moment, we might not see numbers jump just yet.
There are additional factors playing against Gap as it fights to become relevant again, particularly the decline of malls, where many Gap stores are housed.
Gap did not immediately respond to Business Insider’s request for comment.
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