By VIVIAN CHU (AP Business Writer)NEW YORK - Gap Inc. vowed Wednesday to redesign its stores and sharpen its sense of style, part of a sweeping makeover aimed at boosting flagging sales at the world's largest specialty clothing retailer.
"Our team thought we would see more traction in fall and holiday than we did, and what that tells us is that we have a lot more work to do to get product right," said Gap Chief Financial Officer Byron Pollitt, speaking at an investor conference held by brokerage SG Cowen & Co. in New York. "We are maniacally focused on better product and driving traffic, and we are confident we will win back customers the old-fashioned way, one season at a time."
Pollitt's remarks echoed a promise made by Gap's chief executive, Paul Pressler, in late November when he announced the company's worst quarterly sales decline in three years. At that time, Pressler acknowledged the company's flagship Gap, Old Navy and Banana Republic chains needed to liven up their stores and do a better job of keeping up with fickle fashion tastes.
Gap lured Pressler away from Walt Disney Co. in September 2002 to lead the company out of an even more severe sales slump at that time.
Although Pressler initially boosted Gap's sales, he is now facing similar criticism that dogged his predecessor, Millard "Mickey" Drexler. A downturn that began in 2004 has caused some industry analysts to question whether the company will need to replace Pressler to turn things around.
The pivotal holiday shopping season provided little reason for optimism. Gap's sales in stores open at least one year fell 9 percent in December, its 13th same-store sales shortfall in the past 14 months. Pollitt attributed the sharp decline to poor customer traffic at Gap, Banana Republic and Old Navy.
"Over the past several seasons, our product efforts got off track. Christmas and holiday continued to be difficult," Pollitt said. "At the same time however, tight inventory management drove merchandise margins slightly above prior year for the month."
Pollitt also affirmed Gap's full-year financial estimate of $1.12 to 1.17 per share, and said business was approaching the high end of the forecast. The company lowered its earnings estimates after the lackluster third quarter.
Gap shares rose 87 cents, or 3.8 percent, to close Wednesday at $18.15 on the New York Stock Exchange. The stock hit a 52-week low of $15.90 nearly in October.
Though he reassured investors that Gap's financial condition was strong, Pollitt acknowledged it won't be easy to lure back customers.
"We've had a had series of negative traffic and same-store sales. That has a cumulative trend," Pollitt said. "Even if we have a stellar spring line, this is something we have to win back season by season and won't come back right away."
To rebuild sales, Gap said it would spend more to increase customer service in fitting rooms, revamp store displays to show off more clothes, and use more mannequins. The company recently remodeled several Gap stores in Denver, and plans to roll out the new layout across its adult Gap stores over time, Pollitt said.
Gap also intends to design its clothes more quickly so they can be sold in stores before consumer tastes shift and will work with vendors to sell "trend-right" items, Pollitt told investors.
This year, Gap also plans to sign its first agreements to franchise its Banana Republic chain in overseas markets. The company operated 257 stores in international markets as of the end of October last year, excluding Canada.
It's hard for an organization to be big and efficient while being nimble and stylish. Gap just seems so bland; it's hard for any retailer to be "all things to all people" in the current environment.
ReplyDeleteGap became an industry leader in the ‘90s with solid planning and trend-right assortments, much like Limited did in the ‘80s. Both over-expanded and lost focus, but refused to stop acting like arbiters of taste, even as the evidence pointed strongly that they were no longer the place to shop.
ReplyDeleteThe fall of Gap can be traced precisely to the rise of Old Navy. Gap created their own worst enemy, a basics store with rock-bottom pricing, and they’re paying for it with each Gap store closure. The reimaging of Banana Republic as an upscale alternative to Gap cut them off from taking the namesake chain upscale as well.
The updated Gap prototype at Northlake Mall in Charlotte I visited this past September is far more sophisticated design-wise than the generic Gaps of the ‘90s, but it has no clue what demographic it’s reaching out to. The displays are artfully done, but don’t really register with customers. Nobody in the store was doing much shopping at all. And even though it was a brand new store, the sale rack was prominent and full: not a good sign.
It’s like Gap’s shooting in dark blindfolded. I usually buy a couple things a year from Gap even at their worst, but that store left me uninterested in what they’re selling.