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Difficult Times Ahead For Gap, As Sales Shrink

Will Gap follow the route taken by Michael Kors and Ralph Lauren to become profitable? Analysts argue that small is healthier and reducing inventory may very well be the best solution for Gap to come out of the stagnant state it finds itself in today.

Issues facing the brand are as a result of not keeping up with the times and dishing out same and boring stuff to the customer month after month. The brand that was once upon a time the darling of teens, moms and several celebrities no longer rule the world of fashion today. Brands like Levi’s, H&M, Target (TGT) and Zara offering trending denim styles at cheaper prices have clearly usurped the market that was formerly dominated by Gap.

The continuing slump in sales witnessed by Gap since the last quarter has led the company to take some serious steps in the right direction. Closing under-performing stores is one of them as detailed in a new plan that was defined by the company on Tuesday. There are, however, some bright spots to the issues faced by the company and those pertain to the growing sales of Old Navy, Banana Republic and its women’s athleisure brand Athleta. These three brands account for about 70% of the sales turnover and they are growing. Though Gap can draw some comfort from this fact, its core brand failed to sustain its holding and lost out on the millennial market.

With a new CEO at the helm in the form of Neil Fiske, Gap aims to turn around by taking some long overdue actions and one of them is closing hundreds of its non-performing stores. This will help to significantly reduce its losses and retain focus on high performing stores. Profits can increase and customer experience enhanced.

A hike in the stock price of Gap by 5% was seen on Wednesday. Well, Wall Street seems to like the thought of a compact Gap!


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