If you’re a formerly-loyal Gap shopper who has lately been unimpressed by the retailer’s fashions, chief executive Art Peck has a message for you: Hang on until Spring 2016.
On a conference call Thursday evening to discuss the retailer’s lackluster second-quarter earnings, Peck doubled down on his message that while you may not being seeing progress yet at the struggling apparel chain, he believes you’ll start to clearly see a difference early next year.
“I’m not going to stand up at the plate and call which fence we’re going to hit it over,” Peck said. “That’s not who I am. But I’m confident that Gap will make significant progress in spring and very pleased with what I’ve seen in the women’s assortment and the turnaround in the women’s assortment.”
Since Peck took the helm of Gap — the giant retail company that is also home to Banana Republic and Old Navy — in February, he has been candid about the primary source of the trouble at his flagship brand: The clothes simply haven’t been very stylish, and their quality and fit has often not met customers’ expectations.
And so the retailer has undertaken major efforts to overhaul the look and production of its clothing. Peck said Thursday that the retailer has been “resolutely focused” on getting the fit right in its jeans and other bottoms, and promises shoppers will see the fruits of those efforts in the spring line.
Gap has also been working to build a more nimble supply chain, one that can more quickly respond to new trends as they bubble up. They are now using a tactic called “fabric platforming,” industry-speak for buying large quantities of fabric and then figuring out later exactly what pieces you’ll use it for. (For example, a certain denim fabric could be used to make jeans or a jean jacket, or maybe even a shirtdress.) In this way, it is taking a page from its sister brand, Old Navy, which is already using this strategy and has seen healthy sales growth lately in part thanks to its on-trend pieces.
Peck said Thursday that Gap brand’s improved supply chain will allow it to try a new tactic for the first time next spring. It will have the ability to change up its clothing line-up in the middle of the season. If a hot trend emerges or a particular item is flying off the shelves, they can react in real time.
Another message implicit in Peck’s promises of a better Gap come springtime: We probably shouldn’t expect especially alluring fashions and blockbuster sales from the retailer this holiday season.
Gap’s earnings in this most recent quarter were largely in line with analysts’ expectations: Revenue dipped 2 percent to $3.9 billion. The performance of each of its major brands was largely consistent with what we’ve seen from them for months: Value-priced Old Navy chugged along with healthy sales growth, while Gap and Banana Republic saw sales sink as their fashion failed to entice shoppers. The retailer’s stock was down 2.6 percent Friday in early afternoon trading.
While fixing the fashion is at the heart of Gap’s turnaround plan, it is hardly the only crucial component. The retailer previously announced that it plans to close about a quarter of its North American stores and will cut about 250 headquarters jobs, efforts that should help it trim costs. And like so many of its retail rivals, it is investing heavily in its e-commerce capabilities to capture more of your online shopping dollars.
And yet with the promise of better clothes by spring, Peck has effectively thrown down the gauntlet. If investors don’t see meaningful change to the fashion by then, it may make them question how realistic a turnaround is for this iconic brand.