Clothing Retailing - UK - G
ap
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Address:
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2
Folsom St.
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San
Francisco, CA 94105
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USA
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Telephone:
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+1
650 952 4400
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Fax:
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+1
415 427 2553
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Website:
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www.gapinc.com
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Key personnel:
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Glenn
K Murphy (Chairman and CEO)
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Sabrina
L Simmons (Executive Vice President & CFO)
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Art
Peck (President, Executive Vice President Strategy & Operations)
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Stephen
Sunnucks (President, Europe)
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Countries of operation:
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USA,
Canada, UK, France, Republic of Ireland, Japan, plus franchise operations
across Asia and the Middle East.
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Gap
is a clothing retailer from the US that has expanded into Europe via operations
in the UK, France and Ireland. However, falling sales levels have undermined
recent performance and led to declines in market share although the company has
succeeded in cutting costs to improve profitability.
This suggests major underlying issues regarding the company’s positioning and pricing in the UK, with the offer proving less appealing and good value to consumers compared with that of other operators.
History
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1987
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First
UK stores opened.
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1989
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First
store in Canada.
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1990
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babyGap
brand launched.
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1993
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First
store in France.
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1994
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Old
Navy brand launched.
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1995
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First
store in Germany.
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1996
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First
store in Japan.
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2004
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Exit
from Germany.
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2005
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Forth
& Towne womenswear format launched in US.
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2005
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Websites
relaunched. All US sites now transactional.
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2006
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Piperlime
footwear format launched in US.
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2007
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Forth
& Towne closed. November saw the opening of the first Banana Republic
store in the UK.
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2008
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Acquired
Athleta online brand for women’s sportswear and footwear in September.
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2009
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Launches
transactional presence online in the UK, in partnership with ASOS.
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Financial performance
●
Amidst
tough trading conditions in all its markets, Gap saw group like-for-like sales
decline by 12% in 2008.
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Despite
falls in both sales and densities, the company has defended margins and cut
costs, which have resulted in improved profitability in the last couple of
years.
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Declines
in sales are evident amongst the majority of the company’s operations, with the
exceptions being the online and direct sales segment and operations in Asia.
●
The
company continued with its share buy-back scheme during 2008, spending more
than $745 million in doing so in order to increase its stock value.
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Declines
in sales have continued since the year-end. International sales fell by 5% in
the first five weeks of the period year-on-year, and continued with a similar
decline in the three months to 1st August 2009.
FIGURE 89: Gap Inc: Group
financial performance, 2004/05-08/09
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Latest year end: January 2009
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2004/05
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2005/06
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2006/07
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2007/08
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2008/09
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Sales ($m):
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Gap
Inc
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16,267
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16,019
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15,923
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15,763
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14,526
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Gap
(North America)
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5,746
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5,409
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5,134
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4,818
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4,502
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Gap
(International) (a)
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1,505
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1,449
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1,373
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1,435
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1,456
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Gap
(Europe)
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879
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825
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792
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822
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724
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Gap
UK
|
715
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683
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644
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608
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551
(e)
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Gap
(Other)
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na
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na
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39
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122
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225
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Banana
Republic
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2,269
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2,301
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2,548
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2,723
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2,636
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Old
Navy
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6,747
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6,856
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6,829
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6,665
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5,707
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Sales (€m):
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Gap
Inc
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13,078
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12,863
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12,675
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11,500
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11,245
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Gap
(North America)
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4,619
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4,343
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4,087
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3,515
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3,485
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Gap
(International)(a)
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1,210
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1,232
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1,093
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1,047
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1,127
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Gap
(Europe)
|
707
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662
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630
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600
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560
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Gap
UK
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575
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548
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513
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444
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375
(e)
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Gap
(Other)
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na
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20
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31
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89
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174
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Banana
Republic
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1,824
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1,848
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2,028
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1,987
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2,041
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Old
Navy
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5,424
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5,505
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5,436
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4,862
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4,418
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Operating profit ($m)
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1,980
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1,745
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1,174
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1,315
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1,548
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Operating margin (%)
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12.2
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10.9
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7.4
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8.3
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10.7
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Pre-tax profit ($m)
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1,872
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1,793
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1,264
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1,406
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1,584
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Note:
Totals may not sum due to rounding.
(a) Includes the European and Asian operations.
(a) Includes the European and Asian operations.
SOURCE:
Company Accounts and Annual Report/Mintel
FIGURE 90:
Gap UK: Financial performance, 2004/05-08/09
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Latest year to January 2009
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2004/05
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2005/06
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2006/07
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2007/08
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2008/09 (e)
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Sales (£m):
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Gap
UK
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393
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376
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348
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304
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298
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SOURCE:
Company accounts and Annual report/Mintel
Store portfolio
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Sales
densities have declined dramatically, with 2008 proving to be the worst year in
the last five for all but the International operations, which were boosted by
strong performance in Asia.
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In
mid-2008, the company announced plans to consolidate its Gap brands within
larger flagship stores so that such outlets would include kids, baby,
maternity, body and adult Gap under one roof.
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Such
a move has resulted in the closure of some smaller standalone outlets, in order
to cut costs.
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The
Gap Outlet operations are to be expanded in the UK as the company seeks to
expand its lower-price operations in the current downturn.
●
Further
expansion is expected in the next year; the company has announced plans to
launch in Bulgaria, Croatia, Cyprus, Romania, Egypt and Jordan with expansion
in China also being investigated.
FIGURE 91: Gap Inc: Outlet
data, 2005-09
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Year to January
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2005
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2006
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2007
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2008
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2009
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Outlet numbers:
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Gap
Inc
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2,994
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3,048
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3,112
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3,167
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3,149
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Gap
(North America)
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1,396
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1,335
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1,293
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1,249
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1,193
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Gap
(International)
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247
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256
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273
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283
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286
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Gap
(Europe)
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169
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165
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168
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173
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173
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Gap
UK
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135
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135
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136
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136
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134
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Banana
Republic
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462
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498
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534
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576
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603
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Old
Navy
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889
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959
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1,012
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1,059
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1,067
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Sales area (‘000 m²):
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Gap
Inc
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3,401
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3,502
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3,595
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3,680
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3,670
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Gap
(North America)
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1,208
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1,171
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1,143
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1,133
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1,096
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Gap
(International)
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223
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232
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232
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242
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232
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Gap
(Europe)
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144
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139
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139
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139
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139
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Gap
UK
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118
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118
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119
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119
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na
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Banana
Republic
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362
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390
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427
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446
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474
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Old
Navy
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1,608
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1,709
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1,793
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1,858
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1,867
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Sales per outlet ($’000):
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Gap
Inc
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5,408
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5,303
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5,170
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5,021
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4,600
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Gap
(North America)
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4,126
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3,961
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3,907
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3,791
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3,687
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Gap
(International)
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6,008
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5,761
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5,191
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5,162
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5,118
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Gap
(Europe)
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4,966
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4,940
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4,757
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4,821
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4,185
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Gap
UK
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5,200
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5,059
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4,753
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4,471
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4,081
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Banana
Republic
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5,059
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4,794
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4,938
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4,906
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4,472
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Old
Navy
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7,805
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7,420
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6,929
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6,437
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5,369
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Sales per m² ($):
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Gap
Inc
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4,783
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4,574
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4,429
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4,283
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3,958
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Gap
(North America)
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4,757
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4,619
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4,492
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4,252
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4,108
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Gap
(International)
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6,749
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6,246
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5,918
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5,930
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6,276
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Gap
(Europe)
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6,104
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5,935
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5,698
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5,914
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5,209
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Gap
UK
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6,059
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5,788
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5,412
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5,109
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na
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Banana
Republic
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6,268
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5,900
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5,967
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6,105
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5,561
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Old
Navy
|
4,196
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4,012
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3,809
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3,587
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3,057
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Note:
Old Navy does not operate in Europe. Figures may not sum due to rounding.
SOURCE:
Company Accounts and Annual Report/Mintel
Retail offering
Market positioning
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‘Clean,
classic, American designs’ are the words on which the brand was founded and the
current offer continues to reflect these values.
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The
new designs are more contemporary, reflecting popular culture, while product
choice has been broadened.
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Gap
maintains a mid-market stance and has looked to more muted colours in the
current recessionary climate as consumers seek items that will last longer (in
terms of both durability and fashionability), a trend dubbed ‘Depression Chic’
by the fashion industry.
Brands
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All
product lines carry the Gap brand name apart from Banana Republic, launched in
the UK in 2007, and Old Navy, which is not available in the UK or Europe.
FIGURE 92: Gap Inc: Brands,
2008
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Brand name
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Description
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Gap
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Middle-market
menswear and womenswear.
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Gap
Body
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Nightwear,
underwear, sportswear and casualwear for men and women.
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GapKids
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Childrenswear
2-13 years.
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BabyGap
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Baby
and toddlerswear 0-5 years.
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Gap
Maternity
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Gap
styled maternitywear.
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Banana
Republic
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Aspirational
clothing for men and women.
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Old
Navy
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Price-led
takes on Gap styles.
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SOURCE:
Company Accounts and Annual Report/Mintel
Product offer/Pricing
●
In
August 2008, the company decided to get rid of its dedicated European design
team, after just two years in existence. Originally introduced to better target
the European market, with which it had some initial success, the removal of the
team suggests the costs are now outweighing the benefits.
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The
Gap offer in the UK has often been criticised for the quality and aspiration of
its products failing to live up to the strong, appealing, and sometimes edgy
marketing messages – products have often been seen as bland and overpriced
compared with the competition.
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The
company are going against the trend of other leading US brands such as Ralph
Lauren in playing up the Americana aspect of the brand.
Menswear
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The
offer focuses on casual jeans, trousers, shirts, jumpers and outerwear, with
the latest ranges modern and preppy in presentation.
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Other
items on offer follow the standard indie trends such as skinny fit shirts and
jeans and barracuda jackets.
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Price
points appear to have come down on some of the basics, with t-shirts starting
at around £8 and polo shirts at around £15. Jeans are key and retail between
around £30 and £50, with shirts at similar price points.
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The
company also relaunched its aspirational jeans brand in August 2009 in the USA,
called 1969. Designs have been reworked with modifications made to the cut, fit
and production techniques.
Womenswear
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Womenswear,
like menswear, has maintained its traditional roots in focussing on denim and
cotton.
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Items
on offer include t-shirts, shirts and jeans. In keeping with the recent dress
trend in the UK of the last couple of years, the company has also introduced
ranges of dresses at around £40.
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Greater
efforts have also been placed on the fashionability of certain ranges and
include more directional items, with shirts from around £20, skirts for around
£35 and knitwear around £30.
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Maternity
wear includes ranges of jeans, trousers, t-shirts, shirts and sweaters similar
in style to typical Gap ranges but including materials providing a better and
more flexible fit for expectant mothers.
Childrenswear
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The
kids offer is focussed heavily on jeans, trousers, printed t-shirts and polo
shirts.
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It
is an area that has come under strong levels of competition with a number of
lower-price operators able to emulate the styles and designs present within
this offer.
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The
announcement of the Stella McCartney Kids and Baby ranges in June 2009 could
well signal a push more upmarket for the ranges to provide a point of
differentiation. The range is due for launch in November 2009. The hope is that
such ranges will prove as popular as her previous efforts in conjunction with
H&M.
e-commerce and home shopping
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Gap
operates transactional websites for the main Gap brand as well as Old Navy,
Banana Republic and non-store only operators Piperlime.com and Athleta.com in
the US.
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In
the UK, the company has been very slow to move with regards to e-commerce,
despite the strong presence of much of the competition here.
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However,
in August 2009 the company took its first tentative steps into the UK
e-commerce arena, announcing the availability of Gap branded items on the ASOS
website.
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At
the time of writing the range on offer was limited to a few men’s and
womenswear items although the range is expected to be expanded in time for
Christmas.
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