Nitheesh NH
Gap Inc.
Sector: Apparel specialty retail Countries of operation: Canada, China, France, Hong Kong, Ireland, Italy, Japan, Mexico, Taiwan, the UK and the US Key product categories: Accessories, apparel, footwear and personal care products Annual Metrics [caption id="attachment_150980" align="aligncenter" width="700"]
Fiscal year ends on January 30 of the following calendar year*Trailing 12 months ended April 30, 2022[/caption]
Summary
Founded in 1969 and headquartered in San Francisco, California, Gap Inc. is an apparel retail company. It offers accessories, apparel, beauty and personal care products, and footwear for men, women and children under its brands Athleta, Banana Republic, Gap and Old Navy. As of April 30, 2022, the company operates 2,825 of its own stores, 589 franchise stores and its e-commerce sites.
Athleta is a fitness and lifestyle brand for women, founded in 1998. In 2016, the company launched Athleta Girl, a clothing line that targets younger customers, including teens and pre-teens. It currently operates 231 stores worldwide.
Banana Republic is a global accessories, apparel and footwear brand for women and men featuring clothing, eyewear, fragrances, handbags, jewelry and shoes. It was founded in 1978 and currently operates 496 stores worldwide.
The Gap banner offers “American optimism,” according to the company’s website. It was founded on denim and khakis and has sought to reinterpret signature classics for modern wardrobes. It operates 840 stores worldwide.
Old Navy offers wardrobe essentials for the entire family at budget prices. It was founded in 1994 and currently operates 1,258 stores worldwide.
Company AnalysisCoresight Research insight: Gap Inc. has recovered well from the impact of the pandemic and has retained its status as the largest apparel and footwear specialist in the US, mainly driven by strong activewear and athleisure sales under its Old Navy and Athleta banners. However, in its first quarter of fiscal 2022 (ended April 30, 2022), the company reported comp decline of 14% year over year, mainly due to imbalances in assortment and size, aggravated by continued delays in inventory flows. Although Old Navy’s comps turned negative in the first quarter, we believe that the banner is still well positioned to capitalize its value retail positioning and leverage its off-mall locations, which comprise nearly 75% of its estate. Additionally, Athleta remains well positioned to capitalize on the growth of the athletic apparel market, supported by a strong health and wellness trend and the growing casualization trend in the US apparel market. Moreover, Banana Republic (which has been struggling in recent quarters) reported a double-digit increase in comps in the first quarter. While sales weakness at the company’s Gap banner is weighing on its profitability, Gap Inc.’s “Power Plan 2023” strategy aims to rationalize its store fleet and deliver cost savings to improve its operating margin.
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Strategy
On its May 26, 2022 earnings call, Gap Inc. stated that it remains on track to meet its Power Plan 2023 strategy, which was initially unveiled at its investor meeting held on October 22, 2020. The company’s strategy focuses on five key areas:
1. Expand the Athleta brand
- Double Athleta’s revenues to $2 billion by 2023, from $1 billion in 2019. Athleta remains the company’s most profitable brand.
- Open around 100 Athleta stores in the US between 2019 and 2023.
2. Increase Old Navy sales
- Increase Old Navy brand sales to $10 billion by 2023, from $8 billion in 2019—meaning Old Navy and Athleta will account for about 70% of the company’s total sales by 2023, versus 55% in 2019.
3. Optimize Gap and Banana Republic’s store footprint
- Shrink Gap’s and Banana Republic’s footprint by 30%, including about 350 store closures across the two brands between 2019 and 2023.
- Generate cost savings of around $100 million by closing stores and shifting some sales online, with more savings coming from rent negotiations.
4. Expand digital dales
- Increase digital sales to account for nearly 50% of the company’s total sales by 2023, from 25% in 2019.
5. Expand operating cash flow
- Expand operating cash flow to reach around 10% of sales by 2023.
- Increase its operating margin to reach 10% or more.
Company Developments
| Date | Development |
| June 9, 2022 | Gap, in partnership with financial services companies Barclays and Mastercard, launches a new credit card program. Under the new program, Barclays is the official issuer of Gap’s co-branded and private label credit card program in the US and Puerto Rico through the Mastercard global payment network. Gap’s existing 10 million cardmembers fully migrated to the new credit card program. |
| June 6, 2022 | Gap unveils its third collection of non-fungible tokens (NFTs) in collaboration with artist and former soccer player Demit Omphroy—launching Gap x Demit, a limited-edition graphic tee collection. |
| June 1, 2022 | Old Navy broadens diverse representation by expanding its traditional Flag Tee collection to provide three new Flag Tee designs co-created with diverse artists Manuela Guillén, Monica Ahanonu and Edward Granger. |
| June 1, 2022 | Gap and Walmart launch GapKids, a collection of Gap Home products designed exclusively for kids. The collection offers various categories in home space, such as bath, bedding, home décor, furniture, pillows, rugs and throws. |
| May 27, 2022 | Gap, in collaboration with Kanye West’s streetwear brand Yeezy and Spanish luxury fashion company Balenciaga, launch a new collection, Yeezy x Gap by Balenciaga. The new collection features various categories, such as caps, hoodies, hue, jogging pants, outerwear, silhouette and tees. |
| April 21, 2022 | Gap announces the exit of Old Navy President and CEO Nancy Green. The company’s CEO Sonia Syngal is leading this transition until a new brand President and/or CEO is identified. |
| April 21, 2022 | Gap releases environmental, social and governance (ESG) report, reflecting the advancement that the company made in 2021 toward building a more sustainable and inclusive business. |
| April 19, 2022 | Athleta, in collaboration with the US-based athlete Simone Biles, unveils limited edition Athleta Girl collection. |
| March 31, 2022 | Gap announces the launch of the next iteration of its foray into the metaverse, a limited-edition collection of NFTs designed in partnership with fashion influencer Dapper Dan. The launch builds on the gamification of its first NFT launch, allowing shoppers to build their NFT collection with several drops at various price points. |
| March 28, 2022 | Gap enters a new strategic licensing agreement with Unlimited Footwear Group to design, manufacture and distribute Gap branded footwear throughout the entire European Union, Switzerland, Scandinavia and the UK. |
| March 14, 2022 | Gap, through a joint venture agreement with the UK-based apparel specialist Next, opens the first Gap-branded shop-in-shop within Next’s largest West End store on London’s Oxford Street—cementing Gap’s physical return to the British high street. |
| February 24, 2022 | Banana Republic expands into new categories with the launch of BR Baby, a gender-inclusive capsule collection containing playful animal prints, fanciful maps and illustrated palm trees; and BR Athletics, a gender-inclusive capsule collection inspired by retro athletic styles. |
| January 25, 2022 | Athleta enters a new holistic collaboration with American celebrity Alicia Keys to drive consciousness of and access to women’s well-being through co-created product offerings, unique community content and impact grants. |
| January 12, 2022 | Gap launches its first collection of NFTs to bring its banners and products to new and existing customers in a rapidly evolving digital ecosystem. |
| November 22, 2021 | Athleta opens a new 4,800-square-foot retail store in Toronto, its second company-operated store in Canada. Athleta sees this as an advance towards its goal to reach $2 billion in sales by 2023. |
| October 27, 2021 | Gap, in collaboration with Walmart, launches second Gap Home collection, which includes the launch of Gap Home Furniture, along with an expanded assortment of décor, tabletop, bedding and bath options. |
| October 4, 2021 | Gap acquires the New York and Tel Aviv based start-up Context-Based 4 Casting (CB4) that uses artificial intelligence (AI) and machine learning tools to improve the customer experience and expand sales through demand sensing and predictive analytics. |
| September 9, 2021 | Gap announces that it has launched new fulfillment capabilities ahead of the holiday season by investing more than $100 million in its fulfillment centers in Arizona, Gallatin, Phoenix and Tennessee. The new capabilities include increased automation and greater processing power. |
| August 26, 2021 | Gap acquires Drapr, an e-commerce startup that enables customers to create 3D avatars and virtually try on clothing. |
| July 28, 2021 | Athleta launches AthletaWell, a digital platform for women to connect on a range of topics related to female wellbeing. |
| July 22, 2021 | ap launches a new integrated rewards program across the US and Puerto Rico: One Membership. Four Brands. The new program combines loyalty programs under Athleta Rewards, Banana Republic Rewards, Gap Good Rewards and Navyist Rewards. |
| June 4, 2021 | Gap celebrates Pride 2021 as part of its inclusivity initiatives: The retailer noted that each of its brands has created capsules that highlight the beauty of the LGTBQ+ community. |
| May 6, 2021 | Gap announces its new equitable initiative “Closing the Gap,” aiming to offer educational opportunities for the next generation of Black fashion leaders, providing financial awards to fashion departments at Historically Black Colleges and Universities (HBCUs). |
| May 4, 2021 | Gap enters into an agreement to sell Intermix, the company’s omnichannel fashion boutique, to private equity firm Altamont Capital Partners. The sale is a part of Gap’s Power Plan 2023 strategy to prioritize its strategic focus and resources on its growing lifestyle brands. |
| April 13, 2021 | Gap collaborates with Barclays and Mastercard to enhance the retailer’s rewards program. According to the alliance, Barclays will become the exclusive issuer of Gap’s private label and co-branded credit cards by May 2022. |
| March 25, 2021 | Gap enters into an agreement to sell Janie and Jack, the company’s premium children’s fashion brand, to Go Global Retail, an investment platform in the apparel and consumer brand sector. |
| March 24, 2021 | Athleta opens applications for the 2021 cycle of the Move Together grant in collaboration with the Women’s Sports Foundation (WSF). The move comes a part of Athleta’s “Power of She” Fund, which is committed to improving all life stages of girls and women through fitness, movement-based programming and sport. |
| February 1, 2021 | Gap joins the 15 Percent Pledge, a non-profit organization that urges major retailers to commit 15% of their shelf-space to Black-owned business, as an advocacy partner. Gap also announces plans to increase its pipeline programs by 15% to drive opportunity and access for the Black community at the company. |
| January 21, 2021 | Athleta announces the extension of sizing to 350 styles across its collection. By the end of 2022, the brand aims to offer extended sizes across all categories. |
| January 5, 2021 | Athleta introduces its first-ever women’s sleepwear collection, reinforcing its position as a lifestyle brand. |
| November 24, 2020 | Gap Inc. announces Asheesh Saksena as the company’s new Chief Growth Officer, a newly created position focused on executing the company’s future growth initiatives and strategic agenda. Sandra Stangl will join as the new CEO and President of Banana Republic. |
| November 11, 2020 | Gap enters into a partnership with online payment service provider Afterpay to offer its customers flexible buying options. Online shoppers can choose Afterpay at checkout to pay for items purchased in four interest-free installments. |
| October 8, 2020 | Gap announces the appointment of Nancy Green as the CEO and President of Old Navy. |
| September 30, 2020 | Gap and India-based Arvind Fashion terminate a six-year-old franchise business in India. |
| July 7, 2020 | Gap launches a business-to-business (B2B) product program for the organization to purchase reusable, non-medical grade cloth face masks for their employees. |
- Sonia Syngal—President and CEO
- Katrina O’ Connell—CFO and EVP
- Asheesh Saksena—Chief Growth Officer
- Mark Breitbard—President and CEO of Gap Banner
- Mary Laughton—President and CEO of Athleta
- Sandra Stangl—President and CEO of Banana Republic
Source: Company reports/S&P Capital IQ