Gap Plans To Force Online Market

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The company's performance has gradually recovered, although the core brand Gap has yet to turn for the better, but the group plans to force online.

At the same time, it is becoming faster and faster.

Gap group (NYSE:GPS) announced its third quarter performance in fiscal 2017.

In the three months ended September 30th, the performance of the Gap group was recorded an increase of 1% to 3 billion 840 million US dollars compared with the same period last year, representing a 3% increase in sales.

Art Peck, chief executive of Gap group, said Gap's third quarter performance reflects the continued momentum of the key part of the group, and will continue to improve its operational efficiency in the future and invest in Gap's online services and mobile end experience.

As of the end of the reporting period, the group has 3639 stores in 46 countries, of which 3193 are directly owned by the company.

Sales of core brand Gap increased by 1% over the same period last year, while Fishkill sales center lost 4% of its brand.

Old Navy is still the biggest growth driver of the brand, with an increase of 4% in sales and a loss of about 1% in the Fishkill distribution center fire.

Sales of Banana Republic were closed down by 1%, down from a year-on-year decline, while net profit rose to $229 million from 204 million US dollars a year ago.

In the conference call after the earnings announcement, Art Peck said that despite its natural disasters and bad weather, its sales increased for fourth consecutive quarters, and gross profit margins rose for five consecutive quarters.

Thanks to the strong growth of cowboy products, Old Navy is still an important driving force for brand growth.

Driven by the "low cost and high efficiency" mode, the performance of Old Navy has exceeded expectations, but some shops are outdated, and the company will refurbish old shops.

At present, the company has completed renovation work of some 100 stores, most of which are Old Nany.

It is noteworthy that Art Peck said that Old Navy will become faster and the delivery cycle will be shortened to 9 to 14 weeks, depending on whether the product is shipped or airlifted.

The group also put the supply chain problem on the agenda of restructuring. He stressed that the restructuring measures of the group are progressing smoothly. In the future, the efficiency of the supply chain will be improved to meet the changing needs of consumers. The average development cycle of 10 months will be reduced to 8 to 10 weeks, making the company better able to compete with fast fashion retailers.

For the core brand Gap, which has not yet fully recovered, Art Peck said it will continue to improve its Gap brand performance, and the Gap brand will close hundreds of shops in the coming year.

During the period, Gap company closed 277 shops, closing one on average every 6 days.

In view of the downturn in US Department stores, Gap continues to shut down stores with low flow of stores, mainly involving Gap and Banana Republic in shopping malls.

Over the next three years, the company expects to add about 70 new stores, including about 270 Old Navy, Athleta and outlets stores, and close over 200 poor Gap and Banana Repblic stores.

Gap still attaches importance to the Chinese market, trying to further get through the online line and compete for young consumers with other fast fashion brands and e-commerce companies.

In July this year, Gap launched a series of joint design with China's social app WeChat, which aims to narrow the distance between the brand and WeChat's nearly 1 billion active users.

In terms of products, Gap is also making some efforts, such as launching the GapFit sports series, focusing on the fashion of products, and strengthening tannin products which are more popular with consumers.

In August 25th, Gap, the largest flagship store in China, opened in Nanjing West Road. The flagship store on the two floor included men's and women's clothing on the first floor, children's clothing on the two floor and the "gap body" home series.

Throughout this new flagship store, Gap can experience the conscious creation of experience, including mobile phone filling stations and children's amusement parks.

In terms of digitalization, flagship stores have electronic Touchscreens and LED model fitting screens for consumers to get inspiration and look for specific products.

With the impact of the ultra fast fashion business, fast fashion brands are focusing on the experience of physical shops.

There are people in the industry who say that apparel retailers should not only bring consumers to stores through discounts, but try to establish the overall value of physical stores.

It can be expected that the children's playground in Gap flagship store, which provides a new space that is biased toward paternity and lifestyle, and a store with a sense of technology, will stimulate consumers' entry rate to a certain extent, and satisfy consumers' needs for novelty shopping experience and parent child culture experience.

While Gap continues to create experience offline, the expansion of online market is synchronizing.

In Art Pecker's statement, Gap's future online business will reach US $3 billion.

Gap Cherry Zhu, director of the business department of Greater China, told the media that now more than 70 consumers in China can send orders online and store them offline.

Gap plans to open up the online and offline consumer experience of China's business and open up the membership points.

At the same time, Gap and Tmall reached a full channel cooperation, hoping to make up for the shortcomings of Gap's current stores in China through Tmall's traffic advantages, and bring more consumers to the brand.

The Gap Group expects the comparable sales growth in fiscal year 2017 to be about low single digit.

After the release of the earnings report, Gap shares rose 8.19% to $29.6 a share, with a market value of about $10 billion 770 million.

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