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Will Gap's (GPS) Revival Efforts Help it Bring a Turnaround?
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Global specialty retailer, The Gap, Inc. (GPS - Free Report) has been struggling with waning top-line results, owing to ever-changing fashion trends, slow traffic and currency headwinds. Though the company breathed a sigh of relief when it broke its fourteen month record of negative comparable store sales (comps) in June, Gap’s sales data for July and second-quarter fiscal 2016 remained soft. So, is the company back to the grind? Let’s find out.
Gap’s net sales and comps for both the aforementioned periods declined year over year as a result of continued weakness witnessed across its namesake and Banana Republic brands. However, second quarter net sales came ahead of our estimates, thus adding something positive to the otherwise dull picture.
Further, the performance of the company’s Old Navy brand was decent, which added another ray of hope. This brand, which was once the knight in shining armor for Gap, delivered flat comps for July as well as the second quarter, following positive comps in June. That said, we believe the company’s efforts to revive the Old Navy brand have started to pay off.
This is in tandem with the recently chalked-out strategic plan that advocates positioning the company to match the accelerated pace of change in the apparel industry. The company intends to escalate its transformation plan by bringing meaningful changes to its product portfolio and operating capabilities worldwide. The company remains committed to better position itself for long-term growth by setting its priorities right and channelizing its resources accordingly.
Gap plans to focus on growing its brands in regions which offer greater structural advantage and potential to expand market share. Apart from focusing on the market positioning of each of its brands, the company remains keen on streamlining its operating model by creating a more proficient global brand structure. By doing this, it anticipates its brands to better leverage its scale advantages and quickly ascertain and respond to the changing needs of customers and the retail landscape.
However, the apparel and accessories retailer operates in a highly fragmented market and competes with a number of well-established players such as American Eagle Outfitters, Inc. (AEO - Free Report) , Abercrombie & Fitch Co. (ANF - Free Report) and Nordstrom Inc. (JWN - Free Report) in terms of fashion, quality and service. Failure to offer high-quality distinguished products at a competitive price may hamper Gap’s market share, consequently resulting in reduced top and bottom lines.
While the troubles at Gap are quite obvious, we believe the company’s calculated plan provides the much needed boost to turn around its operating performance. That said, let’s wait and see what lies ahead for Gap.
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Will Gap's (GPS) Revival Efforts Help it Bring a Turnaround?
Global specialty retailer, The Gap, Inc. (GPS - Free Report) has been struggling with waning top-line results, owing to ever-changing fashion trends, slow traffic and currency headwinds. Though the company breathed a sigh of relief when it broke its fourteen month record of negative comparable store sales (comps) in June, Gap’s sales data for July and second-quarter fiscal 2016 remained soft. So, is the company back to the grind? Let’s find out.
Gap’s net sales and comps for both the aforementioned periods declined year over year as a result of continued weakness witnessed across its namesake and Banana Republic brands. However, second quarter net sales came ahead of our estimates, thus adding something positive to the otherwise dull picture.
Further, the performance of the company’s Old Navy brand was decent, which added another ray of hope. This brand, which was once the knight in shining armor for Gap, delivered flat comps for July as well as the second quarter, following positive comps in June. That said, we believe the company’s efforts to revive the Old Navy brand have started to pay off.
This is in tandem with the recently chalked-out strategic plan that advocates positioning the company to match the accelerated pace of change in the apparel industry. The company intends to escalate its transformation plan by bringing meaningful changes to its product portfolio and operating capabilities worldwide. The company remains committed to better position itself for long-term growth by setting its priorities right and channelizing its resources accordingly.
Gap plans to focus on growing its brands in regions which offer greater structural advantage and potential to expand market share. Apart from focusing on the market positioning of each of its brands, the company remains keen on streamlining its operating model by creating a more proficient global brand structure. By doing this, it anticipates its brands to better leverage its scale advantages and quickly ascertain and respond to the changing needs of customers and the retail landscape.
However, the apparel and accessories retailer operates in a highly fragmented market and competes with a number of well-established players such as American Eagle Outfitters, Inc. (AEO - Free Report) , Abercrombie & Fitch Co. (ANF - Free Report) and Nordstrom Inc. (JWN - Free Report) in terms of fashion, quality and service. Failure to offer high-quality distinguished products at a competitive price may hamper Gap’s market share, consequently resulting in reduced top and bottom lines.
While the troubles at Gap are quite obvious, we believe the company’s calculated plan provides the much needed boost to turn around its operating performance. That said, let’s wait and see what lies ahead for Gap.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>