Merchant Innovation

Gap Drives Digital Focus While Growing Storefronts

With a new, digitally-focused CEO leading the way, Gap’s fourth quarter earnings call yesterday (Feb. 26) was concentrated on its omnichannel push as the company grows its digital presence while still building its physical storefront space.

Art Peck has been officially leading the company for three weeks, taking over for Glenn Murphy. Prior to joining Gap, Peck shared his vision about how he was going to mix up the company’s strategy of how it would provide customers a personalized brick-and-mortar experience, but with a digital touch. In its fourth quarter, Gap launched its new Order in Store capability as well as its Reserve in Store, Find in Store and Ship from Store options.

“We’ve made significant progress in the omnichannel space, and we’re very excited about the customer response there so far,” Peck said. “And we’re pushing to roll out all of the capabilities across all of our brands across all of North America as quickly as possible. On top of omnichannel, I just really want to spend a moment more broadly on experience. And if you’ve been following some of the changes we’ve done, you would have noted that we brought together traditional marketing activities and our digital activities inside both Gap and Banana Republic.”

In an interview before he joined the company, Peck also mentioned why it was was an exciting time to be in the retail business — explaining it was an era of “disruption,” and said it was the “collision of digital and physical” experiences that made him excited to join the Gap Inc. brand. Peck said he wanted to bring the device capabilities into stores, and based on what he told analysts during the earnings call, that’s the path Gap is on.

“I’m excited about that because the digital expression of our brand is the primary way our customers engage our brands. And if you look at our traffic, the bulk of our digital properties,” Peck said. “And I’m convinced that going forward we will win or lose at our digital lease line. Historically, our websites have and needed to be tremendously effective and efficient channels that our customers bought through, but our digital expression of our brand needs to be more than that. It needs to be aspirational, holistic [and] emotional  in a way that few people have expressed their brands digitally. And we are focused on doing that across all of our businesses.”

Overall, Gap Inc.’s sales for 2014 grew 2 percent to $16.44 billion. Net sales for the quarter hit $4.71 billion, up 3 percent from the year prior. Q4 income was $319 million. Gap Inc. struggled at its flagship store, but sales were strong at Old Navy. Net income 2014 overall was $1.26 billion. Breaking down by brand, Gap saw a 5 percent sales decrease in 2014; Banana Republic sales were flat from the negative 1 percent last year; and Old Navy sales were up 5 percent for the year (11 percent for the quarter).

Gap highlighted a few positive marks in its earnings report, including: 115 new stores worldwide, with 39 new stores in greater China in 2014 (7 new Old Navy stores and 32 new Gap stores). The company also has plans to open up 40 more stores in that region in 2015. Athleta grew its presence across the U.S. and will open 20 more stores in the U.S. in 2015. Gap remains focused on its brick-and-mortar side as the company said it plans to increase store size by 2.5 percent in 2015. Still, its digital initiatives, of course, remained a focus of the company’s earnings remarks.

“Looking ahead at 2015, we will continue executing our global growth strategy, bringing new digital capabilities to life and making the shifts necessary to consistently deliver the brand-right, emotional product that our customers expect from all of our brands,” Peck said in the company earnings release. “I’ve moved quickly to assemble a talented team of leaders who share my sense of urgency and, together, we’re focused and ready for the year ahead.”

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