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Gap Brand remains responsible for the company




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Gap clothing is exhibited at a Gap store in San Francisco, California. (Photo: Justin Sullivan / Getty Images)

After a strong retail report, After a weak first quarter, the company remained optimistic about 6.6% growth and 6.4% in June and July compared to the previous year and the outstanding results of Urban Outfitters. In the second quarter, the retailer was able to increase consensus expectations In terms of both sales and profits, the performance of the brand of the same name leaves much to be desired: comparable sales of Gap Inc. increased by 2% compared to 1

.5% and by brand growth was led by Old Navy, which has a comp Growth of 5% (4% consensus) followed by a 2% improvement in Banana Republic (in line with estimates), while comparable sales of Gap are expected to decline by 5% e down 2.3% as the company confirms its full-year EPS guidance of $ 2 USD The poor performance of the Gap brand in the first half of the year has made the company's ability to reach the top of its lead even more difficult ,

Trefis

We have an estimated price of $ 33 for Gap Inc., which is slightly above the current market price. The charts were created with our new, interactive platform. You can change the various driver assumptions by clicking on the interactive dashboard . Our Outlook For Gap Inc. in the financial year 2018 to assess its impact on the company's sales, earnings and price estimates.

Factors That May Affect Future Performance

1. Persistent strength of the old navy: The brand achieved 5% comps growth in the second quarter, after a tough comparison of 5% last year. The brand regained market share this quarter and was the eighth largest clothing retailer, the second largest apparel brand in the United States. The fact that the brand's goods tend to be focused on the affordable segment has had a positive impact. Given its impressive performance, Gap has accelerated the reopening of the Old Navy. More than 30 were opened in the 2017 financial year, 28 in the first half of 2018, along with 85 conversions. Management found that New Store performance surpassed expectations and conversions outperformed the fleet by an average of five comp points. The company believes that the brand remains underdeveloped compared to its peers, and therefore plans to double its store openings compared to the 2017 fiscal year, which should increase revenue.

. 2 Introducing the Plus Collection: The company announced that Old Navy will launch its previously only available Plus Collection in 75 select stores. The market for women plus sizes lies north of $ 20 billion and is growing faster than the overall apparel market. According to the NPD, Old Navy is one of the top 10 female plus-size brands in the online business, and expanding the category in stores represents a significant growth opportunity.

3. Athleta's Popularity: According to the NPD Group, the activewear industry is the "main driver of growth opportunities" for the apparel industry. Sales in this category increased 2% and estimated the market at around $ 48 billion in 2017. Not surprisingly, Gap's Athleta brand performs significantly better than the industry. The brand recorded another strong second quarter of double-digit growth, despite some weakness, and we expect this momentum to continue in the 2018 fiscal year. In line with its growth strategy described in the 2017 fiscal year, the company expects the new store openings to focus on Athleta and Old Navy, with closures toward Gap and the Banana Republic. Given the strength of its sportswear business, GAP CEO Art Peck has also stated that the company is looking for an acquisition in the area.

. 4 Margin Pressure at the Gap Brand: The process of improving the operating model on the company's registered trademark was associated with storage issues. As a result, the company was burdened with excess inventories in the first quarter, which impacted the company's sales from this brand and its ability to optimize margins as the brand became more effective. The company's gross margin decreased 10 basis points for the quarter, down 20 basis points in the first quarter. Looking to the future, the company has cut 30% styles into the second half of the fiscal year, which should help improve performance.

. 5 Online Business Improvement: The online and mobile business is the place these days, and Gap has made its presence felt in the room. The company has a platform for all its brands, so customers can buy items for everyone in one place. This has also ensured that the new brands get the recognition that would not have been possible with a separate website. As a result, the company has seen strong growth in its online and mobile channels in the second quarter, generating more than $ 3.5 billion in revenue this year. The company has also focused its investment on native mobile apps and improving website speed. These factors should secure the growth of this segment in the future.

. 6 Store Fleet Optimization: Gap Inc. has continued the process of optimizing the number of stores, including reducing the burden of low-productivity stores. The company also saw an opportunity to increase the number of Athleta, Old Navy stores and factory and outlet expressions on the Banana Republic and Gap. As a result, the company opened 60 stores in the first half, mainly Old Navy and Athleta, and closed 38 stores, mainly Gap and Banana Republic.

. 7 Productivity Savings: At the beginning of 2018, management set itself the goal of achieving savings of $ 200 million. This is an important step towards total savings of $ 500 million. The company remains well on the way to exceeding this goal, as the previous savings through strategic negotiations with suppliers to lower product costs, an optimization of the organizational structure by reducing the non-operational marketing dollars, which focus on the storage waste, inefficiency and tightening of control over discretionary spending. These savings will be used to finance the company's investments in the digital space.

What's behind Trefis? See how it drives new collaborations and what-ifs

For CFOs and finance teams | Product, R & D and Marketing Teams

Further Trefis Research

How Our Charts? For example, explore interactive dashboards and create your own.

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Gap clothing is exhibited at a Gap store in San Francisco, California. (Photo: Justin Sullivan / Getty Images)

After a strong retail report, reflecting growth At 6.6% and 6.4% in June and July, respectively, and excellent results from Urban Outfitters, much was expected from Gap Inc. (NYSE: GPS). After a weak first quarter, the company showed Optimistic about Q2 results Although the retailer surpassed consensus expectations in terms of sales and profits, the performance of the brand of the same name leaves a lot to be desired: comparable sales of Gap Inc. increased by 2% compared to the expected 1.5%, and by brand Growth led by Old Navy, which posted a compound growth of 5% (4% consensus), followed by 2% improvement at Banana Republic (in line with estimates), while comparable sales fell 5% at gap Brand, compared with 2.3% While the company confirmed its EPS forecast for the full year from $ 2.55 to $ 2. The poor performance of the Gap brand in the first half of the year has made the company's ability to reach the upper end of its forecast even more difficult.

We have a quotation for Gap Inc. of $ 33 is slightly higher than the current market price. The charts were created with our new, interactive platform. You can change the various driver assumptions by clicking here on the interactive dashboard Our Outlook For Gap Inc. in fiscal 2018 to determine their impact on the company's revenue, earnings, and price estimates.

Factors that may affect future performance

1. Persistent strength of the old navy: The brand achieved 5% comps growth in the second quarter, after a tough comparison of 5% last year. The brand regained market share this quarter and was the eighth largest clothing retailer, the second largest apparel brand in the United States. The fact that the brand's goods tend to be focused on the affordable segment has had a positive impact. Given its impressive performance, Gap has accelerated the reopening of the Old Navy. More than 30 were opened in the 2017 financial year, 28 in the first half of 2018, along with 85 conversions. Management found that New Store performance surpassed expectations and conversions outperformed the fleet by an average of five comp points. The company believes that the brand remains underdeveloped compared to its peers, and therefore plans to double its store openings compared to the 2017 fiscal year, which should increase revenue.

2. Introducing the Plus Collection: The company announced that Old Navy will launch its previously only available Plus Collection in 75 select stores. The market for women plus sizes lies north of $ 20 billion and is growing faster than the overall apparel market. According to the NPD, Old Navy is one of the top 10 female plus-size brands in the online business, and expanding the category in stores represents a significant growth opportunity.

3. Athleta's Popularity: According to the NPD Group, the activewear industry is the "main driver of growth opportunities" for the apparel industry. Sales in this category increased 2% and estimated the market at around $ 48 billion in 2017. Not surprisingly, Gap's Athleta brand performs significantly better than the industry. The brand recorded another strong second quarter of double-digit growth, despite some weakness, and we expect this momentum to continue in the 2018 fiscal year. In line with its growth strategy described in the 2017 fiscal year, the company expects the new store openings to focus on Athleta and Old Navy, with closures toward Gap and the Banana Republic. Given the strength of its sportswear business, GAP CEO Art Peck has also stated that the company is looking for an acquisition in the area.

. 4 Margin Pressure at the Gap Brand: The process of improving the operating model on the company's registered trademark was associated with storage issues. As a result, the company was burdened with excess inventories in the first quarter, which impacted the company's sales from this brand and its ability to optimize margins as the brand became more effective. The company's gross margin decreased 10 basis points for the quarter, down 20 basis points in the first quarter. Looking to the future, the company has cut 30% styles into the second half of the fiscal year, which should help improve performance.

. 5 Online Business Improvement: The online and mobile business is the place these days, and Gap has made its presence felt in the room. The company has a platform for all its brands, so customers can buy items for everyone in one place. This has also ensured that the new brands get the recognition that would not have been possible with a separate website. As a result, the company has seen strong growth in its online and mobile channels in the second quarter, generating more than $ 3.5 billion in revenue this year. The company has also focused its investment on native mobile apps and improving website speed. These factors should secure the growth of this segment in the future.

. 6 Store Fleet Optimization: Gap Inc. has continued the process of optimizing the number of stores, including reducing the burden of low-productivity stores. The company also saw an opportunity to increase the number of Athleta, Old Navy stores and factory and outlet expressions on the Banana Republic and Gap. As a result, the company opened 60 stores in the first half, mainly Old Navy and Athleta, and closed 38 stores, mainly Gap and Banana Republic.

. 7 Productivity Savings: At the beginning of 2018, management set itself the goal of achieving savings of $ 200 million. This is an important step towards total savings of $ 500 million. The company remains well on the way to exceeding this goal, as the previous savings through strategic negotiations with suppliers to lower product costs, an optimization of the organizational structure by reducing the non-operational marketing dollars, which focus on the storage waste, inefficiency and tightening of control over discretionary spending. These savings will be used to finance the company's investments in the digital space.

What's behind Trefis? See how it drives new collaborations and what-ifs

For CFOs and finance teams | Product, R & D and Marketing Teams

Further Trefis Research

How Our Charts? For example, explore interactive dashboards and create your own.


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