Gap vs. Old Navy: one falls while the other thrives

The apparel retailer, Gap Inc., just reported a fall in their quarterly profit for the second quarter in a row.

The company has been hurt by a stronger dollar, shipment delays and also a weak sales at its flagship. They also were injured along the way by a series of fashion misses. Their women’s merchandise selection has ended up turning shoppers away from their Gap brand. Instead, a heavier flow of business has been recorded at their competitors: American Eagle Outfitters Inc., Urban Outfitters Inc., H&M, Forever 21 and Inditex’s Zara, according to the Business Recorder.

Gap reported a fall in net income by more than a third to $219 million, or 52 cents per share in their second quarter which ended on August 1 from $332 million, or 75 cents per share just a year prior.

Setting aside the restructuring and lease buyout costs, the company earned 64 cents per share.

Gap has said that they do not expect a revive at their flagship brand before the holiday season. At this point, they have already reported having ordered their merchandise through that period. So in order to answer to their falling numbers and missed fashion-sense, it announced the closing of underperforming stores as well as a heavy effort toward bringing clothes to stores quicker.

According to analysts, the Gap brand really needs to put their focus on clothing that is geared toward being more feminine instead of heavily relying on their basic skirts, dresses, jeans, t-shirts and shorts.

Gap said, on August 20, that the stronger dollar hit their quarterly sales by $100 million. Their sales and margins were also down because of the late shipments they said of their seasonal merchandise that was in turn because of the West Coast ports and their disruptions.

But Gap’s Old Navy line has been a shining star for the company, continuing to be successful in its attracting customers that are looking for that affordable-yet-trendy line. Old Navy has also been able to maintain tight inventories and depend on short lead times.



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