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Gap Inc. still struggling to make a turnaround

By Kristopher Fraser

Apr 23, 2015

Gap was once a staple in almost every American's wardrobe, and had a wide range of appeal with older customers who were just looking for just some casual clothes to teenagers who just wanted simple everyday wear. Unfortunately for Gap Inc., their namesake label no longer has the former glory it did in its prime. The brand went through what was referred to as a lost decade by Wells Fargo Securities analyst Paul Lejuez, and sales have not been promising.

Art Peck, Gap Inc.'s CEO who took over from Glenn Murphy in February, and Jeff Kirwan, who took over the Gap Brand from Stephen Sunnucks last December, are looked at as having one of the most daunting challenges of any executives in the fashion industry right now (the only executives who have it worst are probably those at American Apparel.) Gap Inc. did have a strong 2013-2014, but, overall, when you analyze the state of the company over the last ten years the results are less than stellar. Market share has been lost at the company period after period.

Not only that, but, their square footage has also declined in North America. Square footage shrank 20 percent, while their store count fell 30 percent. Sales also declined from 5.4 billion dollars to 4 billion dollars. The saddest part of the news was that even their strong stores were failing to comp positive.

Gap's profitability no longer what it used to be

Even when stores were comping positive there was still a 50 percent decrease in store traffic. Sales productivity has also declined over the past decade to 325 dollars a square foot. Lejuez noted in his analysis of the company this, "calls into question the overall profitability of the fleet.…Even including [e-commerce], sales productivity is still below 400 dollar a square foot and 7 percent below where it was in 2005." Wells Fargo has even gone on to estimate that stores could potentially even be generating below 300 dollars a square foot.

Gap Inc. did recently shut down Piperlime due to mediocre sales, but, their other brands (Banana Republic, Old Navy, and Athleta) seem to be performing fairly well. Marissa Webb may arguably be the best thing to ever happen to Banana Republic, and while Gap Inc. doesn't disclose the profitability of their brands, it's no secret Banana Republic is doing well. Sales at Old Navy are strong, too. Perhaps Gap either needs to find their Marissa Webb formula, or find some other new business strategy and find it fast. It would be a shame to see Gap Inc.'s namesake label completely fall from glory, so, one can only hope they manage to find a way to turn around soon.

photo: theflud.com