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Gap Stays Profitable Consider The Consumer

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The Gap Stays Profitable – Thanks Entirely to Old Navy

As second quarter earnings results were reported yesterday it looks like the Gap stays profitable in an industry struggling to adjust to changing consumer preferences and a retail environment in flux. The brand managed to show an increase in quarter-over-quarter sales across the entire company. Interestingly, this growth came entirely from a single brand under the Gap Inc. umbrella: Old Navy Global, which managed an impressive 5% increase in comparable sales relative to Q2 2016. The mathematically-inclined among us, however, will recognize that such strong performance compared to the relatively middling performance of the overall company indicates weaknesses in Gap Inc.’s other brands. Indeed, Gap Global and Banana Republic Global posted 1% and 5% decreases in quarter-over-quarter sales, which, while an improvement from last year’s comparable numbers, belie a somewhat less rosy picture of Gap Inc. as a whole.

The company’s president and CEO, Art Peck, said in a press release: “As we continue to focus on long-term growth, we are accelerating our strategies that put the customer at the center of everything we do – including a focus on product categories where we have clear differentiation, continued investment in our online and mobile offerings, and taking advantage of our operating scale to drive speed to market, responsiveness to customer demands and efficiency.”

Perhaps inadvertently, Peck’s statement underlines Gap Inc.’s recent difficulty in putting the customer “at the center”. After a much-derided “Dress Normal” marketing campaign (because really, whose chief style aim is “normal”?) and Peck’s candid comments last year that their clothes simply “haven’t been very stylish”, one analyst amusingly commented that a fire at a Gap distribution center was not a loss but a “fortuitous reduction in inventory” that people don’t want anyway. In response, executives across the company have strived to put consumers at the forefront of business decisions. One successful effort that may have contributed to the positive sales numbers is “fabric platforming,” a tactic allowing for more flexibility by buying extra fabric that can be used to shift production in response to consumer demand. Hopefully, this shift in Gap Inc.’s strategy towards a consumer focus is permanent!

What do you think about Gap Inc.’s recent changes? Let us know in the comments below.

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1 thoughts on “The Gap Stays Profitable – Thanks Entirely to Old Navy”

  • Christine says:

    Maybe they would do better if they didn’t sell garbage quality clothes. Last thing I bought at Gap fell apart in the wash.

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