Gap Has Been Outdated In China But Has A New Turn In The American Market

The picture shows a store in Old Navy.

According to the world's clothing and shoe net, the biggest apparel retailer in the United States, who is deeply in the mire of performance. Gap There seems to be a new turn in the US market, but the Asian market, including China, has suffered a setback.

Gap group (NYSE: GPS) announced today's first quarter earnings report in 2017. In the three months ended April 29th, group sales were basically flat 3 billion 400 million US dollars in the same period last year, while net profit rose 12.6% to 143 million US dollars. As the most important indicator of retail sales, the group's sales were significantly improved compared with the same period last year, and the growth rate was 2%.

The picture shows three brands of Gap, Old Navy and Banana Republic, 2016 Q1 and 2017 Q1 performance data.

By brand:

Gap group's brand Old Navy Sales increased by 5% to 1 billion 562 million US dollars, while the same store sales benefited from the sale of low priced accessories products, showing an increase of 8%, compared with a 11% rise in the same period last year.

core brand Gap is still in a critical period of reform and restructuring, sales fell 5.3% to 1 billion 158 million U.S. dollars, same store sales decreased by 4%;

Sales of Banana Republic were affected by the customs store plan, down 6% to $517 million compared with the same period last year, while same store sales also recorded a 4% decline. Due to its continued performance in the UK, the group closed all stores in the UK by the end of last year and officially withdrew from the UK market.

The picture shows the performance data of Gap group's 2017 and 2016 fiscal year Q1 brands in different regions of the world.

By Region:

North America is still the main market for Gap group, with sales rising 2.8% to 2 billion 733 million US dollars compared with the same period last year.

Sales in Canada increased by 8.3% to $234 million.

Sales in Europe were affected by the weak tourism industry caused by terrorist attacks, and sales fell by 13.3% to 137 million dollars.

Sales in Asia, including the Chinese market, recorded the biggest drop, dropping 20.5% to $283 million, while sales in other regions increased by 6% to 53 million dollars.

As of the first quarter of fiscal year 2017, Gap group has 3652 stores in the world, including 1305 Gap, 1060 Old Navy, 646 Banana Republic, and has officially withdrawn from the European market.

In the past year, as the rise of electricity providers, consumers gradually moved to the online market, department stores and shopping malls continued to decline, the price competition among brands became more intense, so that the entire retail industry was enveloped in black clouds. According to Wells Fargo, retail brands including Gap, Victoria's Secret, Lululemon, Coach and Michael Kors will also close 2650 stores this year.

Up to now, nearly 10 american apparel retailers have filed for bankruptcy, including Wet Seal, Bebe store, BCBG MAXAZRIA, Eastern Outfitters, The Limited and Stefanel. The latest bankruptcy filing is 21, which has been reported earlier, and is also looking for buyers.

For Gap group in such a downturn environment, net profit still recorded double-digit growth, chief executive Art Peck expressed satisfaction, and revealed that Gap group's restructuring measures are progressing smoothly, substantial improvement has been made in product quality and cost control. In the future, the efficiency of the supply chain will be improved to meet the changing needs of consumers and gradually recover the lost market share.

The global customs shop spread to the domestic GAP and Old Navy 2 stores in Guangzhou and opened in just 9 months.

It is noteworthy that Art Peck said that despite the slowdown in China's economy, consumers' attitude towards shopping has become cautious, but they are optimistic about the long-term development opportunities of the Chinese market. In the just concluded case of social media advertising, the Gap brand in China joined WeChat payment, Tencent social advertising and WeChat card packages, creating an astonishing record of up to 26% of the offline verification rate, ROI exceeding 200%. By matching data from brand member data, store consumption and data from Tencent World Trade Organization, we finally find 49 million accurate potential customers in China for Gap.

However, compared with competitors such as UNIQLO, Zara and H&M, Gap is outdated in China.

Due to the late entry of Gap into China, vague market positioning is not enough to attract the attention of Chinese consumers. In the fast fashion camp, Zara, H&M and UNIQLO have long been firmly established in China. Analysts say that Chinese consumers do not seem to buy Gap, and the Chinese market may not be able to help Gap.

According to analysis, the best selling product for Gap is children's wear, and the other products line is far behind its competitors, UNIQLO and Zara. Early in the Guangzhou market, shops closed quietly, and Gap in Shanghai stores, you can often see "preferential treatment", "thirty percent off concessions" and other promotional advertising, discount not only includes a pile of seasonal clothing, but also the new listing dress, this is a terrible vicious cycle, Gap promotion is like poison, once addicted, it is very difficult to quit, some analysts questioned whether Gap in the minds of consumers will become a promotional brand.

In addition to trying to force the electricity supplier market, Gap group is also upgrading the equipment of offline stores. This year, the brand will launch a digital fitting room app with AR and Google technology in the entity store. Consumers can choose different products before viewing the lens of the mobile device, and can see the upper body effect. The technology has been tested since January.

In addition, Gap group submitted a layoff plan to the Employment Development Department of California in February. The group said in a statement that the layoffs are part of the group's streamlining of the company's structure and reduce operating costs by reducing some unnecessary positions in San Francisco headquarters.

For the 2017 fiscal year, the Group expects its brand's same store sales to rise slightly, with earnings from $1.95 to $2.05 per share, and plans to open 40 new stores, mainly in the Athleta sector and Old Navy, which will continue to shut down the Gap brand.

After the release of the earnings report, Gap group's share price rose 4.14% to $24.15 per share, and its market value is currently about 8 billion 890 million dollars.

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