Gap CEO: We Are Not Dead, Dying or Sick
February 23 2017 - 6:18PM
Dow Jones News
By Maria Armental
Gap Inc.'s sales rose during the critical holiday period and the
apparel chain said they could increase this year, bucking a slump
that has plagued many mall-based retailers.
The company said sales at stores open at least a year increased
2% in the quarter ended Jan. 28, the first quarterly increase since
CEO Art Peck took over two years ago. The retailer, which has been
closing dozens of weaker locations, predicted comparable sales to
be flat or up slightly this fiscal year.
"If you read the headlines today, you'll see the words dead,
dying, sick. We are none of those," said Mr. Peck on a conference
call to analysts Thursday. "We are healthy and strong and have a
plan and clear direction."
Under Mr. Peck's leadership, the company has closed hundreds of
stores, eliminated creative directors and expanded the role of
outside vendors. The former management consultant has also been
emphasizing the use of market-research data to monitor trends.
Mr. Peck attributed the improved results to enhancements in the
quality, fit and aesthetic of products, as well as changes in the
company's supply chain. He said the retailer has streamlined its
inventory management systems and is now buying more fabric ahead of
time to react faster to consumer demand.
"It really helps us to get the right product in the right place
at the right time," he said.
Gap's overall results improved thanks in large part to sales
growth at budget-brand Old Navy, which accounts for the largest
chunk of sales. The brand had faltered in the aftermath of former
leader Stefan Larsson's departure in 2015, but regained its footing
in recent months. For 2016, comparable sales increased 1% at Old
Navy, while falling 3% at Gap brand and 7% at Banana Republic.
Banana Republic has changed leadership amid a prolonged sales
slump. Mr. Peck will oversee the brand, while a search for a new
president is under way. He plans to "get into the business
personally and understand what's going on," he said.
Some analysts have suggested drastic change. It is time for Gap
to explore strategic alternatives for Banana Republic, including a
potential sale or shutting down the brand, according to analysts at
Jefferies.
The company plans to open about 40 more stores than it will
close during the current year, primarily additional Old Navy and
Athleta locations. During the latest quarter, the retailer closed
113 stores, ending January with 3,659 stores.
Fourth-quarter profit rose 3% to $220 million, or 55 cents a
share, including a $71 million charge against Intermix, the women's
fashion boutique it bought a few years ago. Meanwhile, sales rose
1% to $4.43 billion.
--Maria Armental contributed to this article.
Write to Maria Armental at maria.armental@wsj.com
(END) Dow Jones Newswires
February 23, 2017 19:03 ET (00:03 GMT)
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