Surprise respite for ailing Gap sales
A modest rise in Gap sales over the final quarter provided some much needed respite for beleaguered US apparel retailer.
That the Gap brand managed to reduce the pace of decline, represents a small step forward for a firm that has been losing both customers and market share at a fairly rapid pace.
While we do not wish to pour cold water on Gap’s moment in a lukewarm sun, it does need to be pointed out that the overall gain is modest and does not necessarily signal a change in the company’s fortunes. Indeed, the comparatives against which these increases have been recorded are incredibly weak, including the 6.9 per cent dip in total sales that was reported in the final quarter of last year.
When put in this context, Gap has still not regained all of the ground it lost over the past 12 months.
What’s more, the recovery at Gap is fairly patchy and is, as usual, driven by Old Navy – which is now firmly back on track after a few missteps over the past year. The holiday period saw a better line up of merchandise at Old Navy, backed by some very sharp promotions which lured customers into stores and online. The strong product story carried through into January, although the level of promotional activity eased off, which reduced growth levels by a small degree.
While the Gap brand did not report growth, it did show signs of progress in ensuring that the decline in sales was moderated. There were also better results for December and January – in these months Gap managed to notch up comparable sales increases of 1 per cent and 3 per cent, respectively.
Unfortunately this advancement was offset by a much weaker November. This raises the question as to whether these improvements are the result of a bottoming out of Gap’s misfortunes, or the start of a small revival. It is probably more of the former than the latter, especially since the weather over the fourth quarter this year was much more conducive to the sale of winter garments than the year that came before it. Gap still has a lot of work to do in creating a compelling and focused apparel proposition that resonates with consumers.
If Gap is now treading water, Banana Republic is still sinking. Despite terrible prior year results which saw comparable sales slide by 14 per cent, the company managed to post a 3 per cent same-store sales decline. This is a brand that has simply lost its voice and is not being heard by consumers in a market that is full of clamorous, and more melodious, rivals. While Gap is right to dial back on the Banana brand across the UK and European markets, it must make a decision as to how it will revive its fortunes in the US. On this front there is little evidence of much decisive action.
The year ahead forecasts reflect this lack of overall progress. Comparable sales will, at best, be slightly positive and at worst modestly negative. For the time being, the much promised recovery remains elusive.
- Carter Harrison is an analyst with GlobalData Retail.