Gap Inc. ‒ is the largest American clothing retailer, and owns the third-largest chain of stores in the world. The company’s portfolio includes such brands as Gap, Old Navy, Banana Republic, Athleta, etc.
Most of them show positive dynamics, while the flagship brand in recent years, on the contrary, has experienced a serious decline in key financial indicators.
Problems with sales began a long time ago
Back in 2018, the current CEO of the corporation, Art Peck, stated that he was dissatisfied with the profitability, traffic, and buying experience of Gap. Only in the third quarter of the same year, brand sales fell by 7%. Therefore, Peck planned to close most of the offline outlets. However, due to the premature departure of the head from the post in November 2019, the corporation failed to fully implement its plan.
Recall that as head of Gap Inc. Art Peck was replaced by founding family heir Robert J. Fisher. But in March 2020, the company appointed Sonia Singal as CEO.
Gap to close about 30% of stores through July 2021
Recently, the American retailer Gap Inc. announced its intention to close about 350 more Gap and Banana Republic stores, which is approximately 30% of all outlets. About 120 of them fall on the European continent: France, Italy, Great Britain. Also managed by Gap Inc. there is a question about closing a warehouse in the UK.
Most closures will occur before July 2021, according to Le Monde. By this time, the corporation hopes to increase revenues from e-commerce. At the same time, Gap does not want to completely lose objects, as they can be useful in expanding their e-commerce activities. Perhaps the retailer will simply transfer part of the business to franchising companies.
The closure of European offline stores will lead to a loss of about 3% of the turnover of the American brand. In 2019, sales of the flagship brand Gap Inc. in Europe brought in $539 million with total sales of §13.3 billion.
Power Plan 2023 is Gap’s new strategy focused on online channels
On October 22, Gap held an online meeting with investors and presented a new development strategy – Power Plan 2023. The corporation is shifting its focus towards online trading.
For 9 months of 2020, Gap recorded a loss of $994 million. However, the new strategy should fully compensate for them and return profit streams as early as 2021.
So, over the next three years, the Old Navy brand plans to double the share of sales that falls on online channels. According to forecasts, total revenue will increase from $8 to $10 billion. Additionally, offline stores will be opened – 30-40 outlets per year.
Great hopes are pinned on the young brand Athleta, which produces sportswear exclusively for women. The corporation will work to increase its visibility by opening 100 new stores and injecting online promotion. By increasing brand awareness, Athleta plans to double its revenue from $1 billion to $2 billion. There are also plans to open about 100 new stores under this label.
As a result of Power Plan 2023 Gap Inc. expects Old Navy and Athleta sales to increase to 70% of total volume versus 55% today.
Also in June of this year, the corporation announced a cool collaboration. Together with rapper Kanye West, the flagship brand will release an exclusive clothing line Yeezy X Gap. This move should have a positive impact on sales and, perhaps, even “save” the largest representative of the mass market from collapse.
As you know, Kanye West has already had several powerful launches, together with global brands. What are only the Yeezy Boost sneakers released with Adidas. The first edition of the model sold out in 10 minutes. Therefore, we can say that everything that the rapper undertakes is doomed to become fashionable and sold.
Is Gap stock going up?
Since the beginning of 2020, Gap quotes have grown by 19% and hover around $20. Analysts do not yet give detailed forecasts, but they are inclined to believe that the brand will be able to maintain its position. What’s more, rising e-commerce revenues and new projects may even drive up the price of a company’s stock.