Gap Inc. (NYSE:GPS) has recovered nicely from its March lows, going on to gain more than 30%. The rally has come at the back of a challenging environment, owing to the COVID-19 shocks. The retailer has already announced plans to close down as much as 30% of its stores over the next three years faced with changes in consumer shopping patterns.
Struggling Brands
Amid the pandemic, most people opt to do shopping online and have items delivered at the doorstep. Likewise, Gap has taken a significant hit with its banana republic, Old Navy, and Athleta Brands reporting a substantial sales decline.
While Old Navy net sales were down by 5% in the recent quarter and Athleta sales rose by 6%, they remained the most resilient among its brand. Gap sales were down 28%, with the banana republic segment reporting a 52% decline in sales.
In the wake of the disappointing financial results in the recent quarter, the new CEO, Sonia Syngal, has announced a shift of strategy that will see an increased focus on strengths and shedding of weakness. The closure of 30% of Gap and banana republic stores is part of the strategy. The long-term goal is to grow Old Navy to a $10 billion brand and reinvent the banana republic brand while doubling Athleta sales.
Focus On Digital Sales
In the long run, Gap intends to generate 80% of its revenue from e-commerce and store that are not located in malls. Likewise, it expects old navy and Athleta to account for as much as 70% of total sales. Increased focus on Old Navy and Athleta makes lots of sense as the brands have remained resilient amid the pandemic.
The banana republic brand will focus purely on casual comfort as Gap goes back to being the company’s fashion statement as part of the new strategy. The new CEO has also been pushing for new strategies, which include partnering with singer Kanye West.
Syngal strategy is already bearing fruits as Gap stores were up year over year in the quarter ending July. Increased focus on e-commerce has also seen the apparel retailer emerge as the leader in digital shopping, as well as a broad array of Omni-channel shopping options.