The Gap (GPS) 2Q16 Earnings Call Notes

posted in: Earnings Call, Notes, Retail | 0

Old Navy brand has performed well

“I think the return to improved performance that we’ve seen at Old Navy is validation. It’s validation that we can, once again, move the brand to a market share gaining position, validation of the operating model that has allowed us to respond quite quickly and improve the business quite quickly, validation in the fact that we have a solid team in place, and frankly, validation of the value proposition that our consumer sees in Old Navy.” Arthur Peck – CEO

 

Banana Republic brand has not performed well

Let me move to a brand-by-brand conversation for Q2 and I want to start with Banana Republic. Clearly, nowhere close to the performance that the brand is capable of, nor what we expect and want to hold it accountable for.

The team and I are relentlessly focused on continuing to make improvement in the business and under the covers, there are some proof points that the work that we’re doing is the right work… So, we have urgency and we have a lot more work to do. Arthur Peck – CEO

 

Which demonstrates the strength of discount retail and weakness of higher-end retail

So, number one on my mind is a consumer environment and let me tease it apart. There’s obviously some strength out there in different parts of retail. In apparel specifically, the environment remains challenging, and quite frankly, it remains most challenging in the higher end of the market. And just to remind everybody we have a very robust value portfolio with our outlet channels and the Old Navy business. Arthur Peck – CEO

 

Innovation— like stretch and stain resistance— is a focus for GPS

We’re pushing stretch across, — really in men’s, our two key bottoms fabrications in terms of denim and twill and both shorts and long bottoms. And really testing where else we can go with it, because we believe that it’s actually really revolutionizing in many respects…So, that’s a step. We have nanotechnology in pants in Banana that we have basically not marketed at all, which is highly stain-resistant. If you pour a cup of coffee on the pants, it beads up and runs off and we find that he has responded to that. Arthur Peck – CEO

 

GPS believes it is well-positioned to ride a resurgence in denim

“We’re obviously extraordinarily well-positioned in the denim business across all our businesses. Banana has a great denim business now as well and it’s front of store. I’m not ready to say — I’m always hopeful about denim and it’s been in a trough for a long time.” Arthur Peck – CEO