Gap Inc. is working to improve both its digital and in-store experiences as part of its brand reinvigoration efforts. CEO Richard Dickson highlighted several strategies during the company’s quarterly earnings call on Thursday.
For Old Navy, the focus is on delivering clearer pricing and promoting value through in-store and online communications. Dickson sees an opportunity in activewear, which is the largest category in the U.S. apparel industry at $70 billion. The Gap brand is working to enhance the customer experience by improving its digital dialogue and the service and aesthetics at its stores.
The company aims to attract new customers through collaborations. “Between our campaign methodology and relevant collaborations, we’ve seen resonance with a broader customer base and increased engagement with the brand,” Dickson said. Banana Republic is being repositioned in the premium lifestyle space with new product assortments, better fit, and changes to its digital and brick-and-mortar presence.
The company is optimizing its store footprint and shifting its media mix towards social and influencer marketing. Athleta is focusing on improving its product, marketing, and stores. The brand is attracting new, higher value customers through a new marketing methodology and media mix.
Dickson noted that Athleta has seen momentum in growing new followers on TikTok. Gap Inc.’s “brand reinvigoration playbook” is comprehensive for each of its brands. “We’ve made great strides on product and marketing and are focused on continuous improvement as we enhance both the in-store and online experiences for our customers,” Dickson said.
Gap raised its guidance ahead of the holiday shopping season, touting a “strong start” to the fourth quarter. The company surpassed Wall Street’s earnings estimates despite a tough quarter affected by unseasonably warm weather and hurricanes. Gap expects fiscal 2024 sales to increase between 1.5% and 2%, up from previous guidance of “up slightly.” This is ahead of the 0.4% growth expected by analysts.
Gap focuses on customer experience enhancement
The company also anticipates higher growth in gross margins and operating income. Shares surged about 13% in extended trading.
Gap reported net income of $274 million, or 72 cents per share, compared with $218 million, or 58 cents per share, a year earlier. Sales rose to $3.83 billion, up approximately 2% from $3.78 billion the previous year. CEO Richard Dickson explained that unseasonably warm weather impacted sales by about 1 percentage point during the quarter, while hurricanes led to overall store sales falling by 2%.
However, sales rebounded once the weather improved, and the holiday shopping season saw a strong start. “We are energized about the holiday. Our teams are really focused on executing our plans.
Comparing ourselves to last year, our brands are in a much stronger position,” Dickson said. “We’ve got stronger brand identities and are more practiced in our playbook, focusing on better product, better pricing, more relevance, better consumer experience, and excellence in execution.”
Retail stocks rallied on Friday, with Gap leading the way higher after CEO Richard Dickson’s turnaround plans showed signs of traction. Gap was up 12.8 percent to $24.87.
Other retail stocks also saw gains, including Macy’s, Abercrombie & Fitch, Victoria’s Secret, VF Corp, PVH Corp, Tapestry, and Urban Outfitters. Analyst Simeon Siegel of BMO Capital Markets said, “People are looking for permission to own retail stocks, and through earnings reports so far, they have been given that permission.” Retailers reporting third-quarter results have seen significant gross margin expansion, which has helped support stock prices. Despite inflation concerns post-pandemic, brands have managed to maintain prices, benefiting gross margins.
The broader economic landscape has remained stable with low unemployment, despite earlier fears of recession. Gap, in particular, has been performing well, pushing its third-quarter operating income up 42 percent to $355 million while sales rose 2 percent to $3.8 billion. The company even raised its full-year outlook.
“We are excited about the holiday season,” Dickson told WWD. “We have already seen a strong start.”
As the holiday season begins, investors appear to be feeling a renewed sense of optimism in the retail sector.
