Gap Reports Yet Another Month Of Declining Comparable Sales

Gap Inc (NYSE:GPS) recently reported its August same store sales, which fell by 3%, driven by a 10% decline in its Banana Republic brand. While comparable sales at Gap Global also were a negative 5%, versus a negative 8% last year, its Old Navy brand reported a positive comparable sales of 1%; however, when compared to a 6% rise last year, this brand also disappointed. For the company, as a whole, the August sales were down 2% to $1.17 billion. Any sign of a rebound, as hinted in the positive comparable sales in June, was indeed a blip on the radar, as following that, the company has reported two consecutive months of declining comps.

See our complete analysis for Gap Inc.

Banana Republic can be identified as the weak link for the company, as it has not reported positive monthly comparable sales for over a year. Lackluster product assortment is pushing customers away from the brand, and the consumers are unwilling to pay the premium prices it once commanded. Consequently, it is falling into the same trap as Gap, by resorting to discounting and deals to get rid of the built up inventory.

In May, the company had warned of weak sales across its portfolio, and noted steps would be taken to streamline its business. This included evaluation of its Banana Republic and Old Navy operations outside North America. During the first quarter earnings call, the decision to shut the Old Navy stores in Japan, in order to concentrate on its operations in North America and China, was announced. Further, in Banana Republic and Old Navy, the company has made adjustments to the ticket prices, where it was felt that the initial prices weren’t competitive. CEO Art Peck is also following in the steps of his predecessor, Glenn Murphy, by focusing on speeding up the production time and improving the supply chain. The company has also been looking to improve its production times and work on its processes in order to quickly react to the changing fashions. This would help them to better compete with fast fashion retailers, such as H&M and Zara.

The company is also planning to ramp up its marketing, which the company feels has paid off for its Old Navy brand. In August, Old Navy began airing a new campaign aimed at the back to school market, featuring Amy Schumer, which may have helped in the positive comps for the brand in August. The popular comedian has been signed on for several spots for the brand, which will be aired through the holiday season, and can be a possible medium for driving incremental traffic to the stores.

Have more questions about Gap Inc? See the links below:

• Can Old Navy Win The Back-To-School Market?
• What Are The Problems Plaguing Gap Inc.?
• Gap Reports A Weak Outlook For FY 2016
• Fall In Sales To Weigh On Gap In The Second Quarter
• After Positive Results In June, Gap Returns To A Sales Decline
• Are There Signs Of A Turnaround At Gap, Or Is It Just A Blip On The Radar?
• Are Gap Inc’s Earnings Volatile?
• What’s Gap Inc’s Revenue & Net Income Breakdown In Terms Of Different Brands?
• By How Much Did Gap Inc’s Revenue & EBITDA Grow In The Last Five Years?
• What Is Gap Inc’s Fundamental Value Based On Expected 2016 Results?
• By What Percentage Can Gap Inc’s Revenues Grow Over The Next Three Years?
• How Are Gap Inc’s Old Navy Revenues & Earnings Expected To Grow Over The Next Five Years?
• How Are Gap Inc’s Banana Republic Revenues & Earnings Expected To Grow Over The Next Five Years?
• How Much Revenues Can Gap Inc’s Athleta Brand Add By 2020?

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