Old Navy boosting Gap in profits
Anyone paying even limited attention to the retail marketplace these days can tell you that mall-based textile shops are struggling to make ends meet. More online selection and other retail options are draining the once dominant mall shops of their customer base. While larger department stores are struggling, many smaller storefronts familiar to mall shoppers are going away completely.
Such could have been the fate of The Gap, the place to go for fans of khakis and cardigans. The company, which also owns Old Navy and Banana Republic, has been struggling to make ends meet in recent years. That is until it came soaring back last week, reporting a sales increase that sent stock soaring up 15 percent. The bump was so good, the 2016 year-to-date average is ticking upward.
That’s not to say things are entirely peachy at The Gap. Both the eponymous brand and its sister store, Banana Republic saw sales slip at least ten percent recently. So what gives? Why is Wall Street breaking out the bubbly for such poor performers? Because Old Navy is raising the sea level of all three brands. Customers are loving Old Navy, and sales are sliding upward … and look to be creating some momentum to keep going in that direction.
This is a breath of fresh air for The Gap, who has failed to account for widespread social changes and a generation of Millennials who would not be caught dead in the big label apparel their parents craved. This issue, in particular, has led to rough times for fellow mall denizens Abercrombie & Fitch and pretty much-devastated others like Aeropostale.
The kids just don’t care about wearing names anymore, and retailers need to get with the program if they are going to stay relevant in a rapidly changing fashion world.
This is relatively uncharted territory for many brands, especially mall-exclusive shops accustomed to a built-in customer base of high school and college kids clamoring to buy whatever they can with the store logo emblazoned on the chest. And, while there are still some dedicated consumers looking for these items, they are much fewer and farther between than they were even five or ten years ago.