Gap’s digital mindset is lacking as retailer sees online sales drop 17%

Life doesn’t get much better for US retail institution Gap. Despite its supposed digital shift, when diginomica last inquired about the company, it did not produce the transformative impact anticipated. Fast forward a few months and there’s still plenty of red ink to be seen.

For the quarter ending in late April, Gap posted a loss of $162 million, compared to a profit of $166 million for the comparable period a year ago, while revenue fell 13% from 3 $.99 billion last year to $3.48 billion. The revenue slump is widespread – Gap itself is down 11% year-over-year, while Old Navy, previously the portfolio bright spot, is down 22%.

And perhaps most alarmingly for a so-called digital retailer, online sales are down 17% year over year.

Sonia Syngal, CEO, was quick to point to what she called “industry-wide headwinds” as a critical factor in (recent) poor performance:

Although we are disappointed to deliver results below expectations, we are confident in our ability to navigate headwinds and re-stabilize the Old Navy business to deliver on our long-term strategy. This current period of acute disruption has clarified the urgency of the improvements needed to get us back on track.

Inflation is eating away at consumer confidence at the cheaper end of the Gap empire, she added:

We began to feel deeper weakness during the quarter at Old Navy, and to a lesser extent at Gap North America, as these brands were most exposed to the rising inflationary environment affecting our low-income customer base.

Add to that the supply chain challenges, she continued:

Historically, speed and agility have been powerful levers for [Old Navy]. However, supply chain challenges and ongoing delays have significantly limited the brand’s responsiveness capabilities. Twelve-week pipelines for core categories have been critical to Old Navy’s success over the years. Going back to a longer inventory push model not only diluted economic value, but meant we were setting customer trends too early in the process and couldn’t source the right fashion choices any closer. This resulted in excess inventory and less relevant styles. this will put pressure on sales in the short term as we rebalance the assortment in the future.

my catch

What I found interesting on yesterday’s post-earnings announcement conference call was the almost complete absence of any bragging about the digital mindset or the “we really are a tech company” stance. which has been seen in the past.

There were some bright spots – Athleta continued to grow and Banana Republic, so long the problem child, saw revenue increase 27% year over year, but that’s from a difficult basis.

On Banana Republic – and from a purely personal point of view – I was appalled when Gap decided to close its stores in the UK, where I live, but consoled that the company was maintaining a e-commerce operation here. No more! The latest “Fortress America” ​​takedown is to shut down Banana Republic’s website outside of the United States! (To add insult to injury, the last day of surgery is my birthday!).

Before the company opened a store in London a few years ago, shopping trips to Banana Republic in the US were always accompanied by puzzled salespeople commenting on the amount of stuff UK tourists would buy. It’s because you don’t have a UK store or online offering, would be the answer.

Then the company had both.

Now he has neither.

It is not a brand that advances as it should, with or without a digital mentality.


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David A. Albanese