There Will Be 200 Stores This Year. Gap Group CEO Acknowledges Problems In Brand Operation

Despite the global fashion retailing as a whole, the fast fashion Gap is still looking for the right track.

According to fashion business news, Art Peck, chief executive of Gap (GPS.NYSE), admitted at the annual shareholders' meeting that there were problems in the operation of its Gap brand, which led to a slow recovery in the sales performance of the brand, but emphasized that it had nothing to do with product design and quality.

Compared with Old Navy, which belongs to a group, Gap has lagged behind in recent years. As a former sales leader of fashion industry, Gap has been rated by Forbes as one of the ten fashion brands that may disappear in the next 10 years.

When it comes to the specific problems of Gap, Art Peck said it was similar to Old Navy in 2015, but Old Navy quickly hit bottom rebounding in the two quarter. Now it has become the engine of group performance growth. Therefore, he believes that the problem of Gap will soon be resolved.

It is noteworthy that Art Peck also made similar remarks at the shareholders' meeting in 2015, promising to restore Gap brand growth as soon as possible. However, over the past two years, the Gap brand is still bogged down in the mire, thus making its commitment even more feeble.

Gap was founded in 1969, with a variety of basic products such as T-shirts and casual pants, has a way out in the fashion industry until 2002.

But the rapid expansion of the entity store has led to its financial situation in distress. Gap has been in a state of confusion over the past few years after the introduction of a large number of executives and cost cutting measures.

In 2011, Art Peck became president of Gap North America. By introducing the color jeans product line, Gap rekindled the enthusiasm of young consumers and stimulated the brand to grow in the same store for two consecutive years and return to the top of the American casual wear industry.

In October 2015, Art Peck officially became the helmsman of Gap group.

After taking office, Art Peck's first move was to dismiss the creative director of Rebekka, Bay, at that time, and turn the product creativity to the brand design team.

In his view, creative directors are nothing but "false saviors".

However, due to the impact of excessive subdivision size, the huge inventory and shop size become the biggest obstacle to Gap performance stagnation. For this reason, Gap used to discount sales to eliminate inventory in the past, but made it a synonym for promotion in the eyes of consumers, and fell into the curse of performance by discount.

Some analysts pointed out that the downturn of Gap in recent years is actually paying for its frequent lack of bottom line discount, and who is the target consumer group of the brand, and which market segment is still not clear.

According to fashion headline data, Gap sales increased by 2.2% to $15 billion 860 million in the 2017 fiscal year ended February 3rd, while Old Navy sales rose 6.2% to $7 billion 238 million, while Gap brand sales continued to decline, down 2.5% to $5 billion 318 million.

In order to accelerate the recovery of Gap, the group announced in February this year that its brand chief executive, Jeff Kirwan, was leaving. Its position is temporarily represented by Gap executive vice president and global talent and sustainable development director Brent Hyder.

Art Peck revealed that despite the closure of nearly 100 stores last year, the Gap brand will continue to close 200 stores in the next year, but plans to add 60 new Old Navy stores.

In view of the fact that Asia has become the second largest market in the Gap group after the United States, Gap regards China as one of its breakthrough points, trying to further open up online and offline competition with other fast fashion brands and e-commerce providers for young consumers.

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

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.

However, at the beginning of this month, Chinese netizens broke the news on micro-blog, saying that a T-shirt of Gap suspected a large area to "cut" the map of China.

Images from the Internet show that the Chinese maps of Zangnan, Taiwan, and the South China Sea have been erased, and the appearance of Bohai has changed. This incident has even attracted the attention of the Chinese Ministry of foreign affairs.

Although Gap immediately apologized in official micro-blog, and said that the products had been withdrawn and destroyed from the Chinese market, it still caused widespread concern among Chinese consumers. The topic of "Gap apology" has been on micro-blog's hot search list for two consecutive days, which undoubtedly brings greater uncertainty to the brand in the Chinese market.

In the US market, new brands launched by retail giants such as Amazon and WAL-MART also pose a threat to the market share of Gap.

According to statistics, Amazon currently has 85 private brands, including 71 clothing brands, most of which are designated as Prime exclusive products.

Some analysts pointed out that Amazon's newly launched jeans brand will nibble the market share of women's clothing in Gap.

In the face of the situation of being caught up in the long run, Art Peck also decided to slim down the retail channel under the Gap line.

He said the group had initially tasted the sweets of online shopping services through Old Navy, and would promote the digital pformation strategy of Old Navy to other brands under the group, but refused to provide specific details.

In Gap last August, the largest flagship store opened in Nanjing West Road, Shanghai, Gap can be seen everywhere, 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.

According to the data, Gap group's sales volume of online business increased by 30% in the fourth quarter of last year.

In March this year, Gap set up a three month make-up flash shop in the store and the Hongkong Plaza store in Shanghai, offering the make-up products of POP KIT, the US niche cosmetics brand.

This is the first time that Gap has sold cosmetics in China, and is the first time that POP KIT has entered the Chinese market.

Zhang Anqing, creative director of Gap group Greater China, said that the purpose of establishing a beauty store is to attract more young consumers to the shops.

In addition, although Gap has never positioned itself in fast fashion, in the rapidly developing apparel retailing industry, Gap has gradually been placed in the same camp of Zara and other fast fashion brands, and consumers have raised expectations for the Gap supply cycle.

In this case, Gap also put the supply chain problem on the agenda of reorganization.

Art Peck stressed that the restructuring measures of the group are progressing smoothly. In the future, the efficiency of the supply chain will be improved and the input of consumer data collection and analysis will be further increased, so as to better meet the needs of consumers and enable the company to compete better with fast fashion retailers.

UNIQLO, which is more similar to Gap, announced earlier that it would further shorten the product cycle and provide consumers with more freshness.

For Banana Republic, which also closed its stores and started restructuring since then last year, the group announced earlier that the New York headquarters with 112 employees will move to San Francisco and new design centers will be set up, and some of its employees will be affected.

Gap group spokesman said the move was aimed at improving the long-term sluggish performance of Banana Republic.

However, whether Art Peck can persuade investors to continue to maintain confidence in Gap, the group's first quarter earnings report released in May 24th is crucial.

Some analysts expect an increase of 5% or a 28% increase in earnings.

Among them, Reuters analysts believe that the increase in consumer disposable income and the positive performance of US apparel retail sales in April will play a catalytic role in the performance of Gap group, especially in the past year, a total of 30 stores added Old Navy revenue is expected to significantly improve.

NPD group pointed out that with the movement and leisure wind gradually becoming the mainstream of the industry, Gap group's sports brand Athleta has the potential to become the same driving force as Old Navy.

It is reported that Athleta has been doing well in recent years, and its growth rate is much higher than the industry average. Last year, the sales volume increased by a high number of units. Analysts expect the brand to continue to maintain strong growth in recent years.

At present, the restructuring and pformation strategy of A&F and Levi's, which has similar experience with Gap, has come into effect, and sales have regained growth.

Chip Bergh, chief executive of Levi's, said in an interview that a meaningful brand can win the favor of the millennials, while a distinctive and quality brand is likely to win their recognition.

There are people in the industry who believe that Gap is unlikely to revive its past glory. However, under the leadership of Art Peck, who only believes in strategy and data, it is only a matter of time before the recovery is realized, but the premise is that Gap must be recognized by young consumers in products and creativity.

Since the beginning of this year, the stock price of Gap group has fallen by more than 6%. After the general meeting of shareholders, its share price rose by 0.16% to $31.75 per share, and its market value is about $12 billion 300 million at present. (GPS.NYSE)