Gap Inc. CEO predicts clothing rebound as consumers emerge from Covid-19 pandemic
executives said consumers were eager to purchase the types of clothing that they were able to give up during much of the Covid-19 pandemic, predicting a rebound in sales in the second half of the year after a difficult 2020.
“We’re pretty optimistic,” CEO Sonia Syngal said in an interview. “We think there’s going to be this peacock effect happening, as people come out of Covid” and dress to impress others.
After the pandemic temporarily closed its stores and reduced demand for dresses and workwear, the company predicted on Thursday that net sales would increase by an average to high percentage rate in 2021. The outlook predicts a continuing trail of the pandemic in the first half and a return to more normalized prepandemic sales in the second half, the company said.
In the quarter ended Jan. 30, a surge in online shopping over the holidays helped the company offset lower sales in its stores. The continued gains of Old Navy and Athleta were offset by another quarter of decline in the Gap and Banana Republic brands. Overall, same-store sales – which exclude recently closed or opened stores – declined slightly, including a 49% increase in online sales.
Ms Syngal said Banana Republic had suffered some ‘hard knocks’ during the pandemic given its work-oriented selection, but said the 2020 launches of luxury athletics and intimate products have been well received. “For us, it’s about regaining creative relevance,” she said.
Mrs Syngal has developed a plan to revive the struggling business closing hundreds of Gap and Banana Republic stores, reducing the number of items sold and pushing executives to take more creative risks with the flagship brand.
The company ended its year with higher levels of unsold merchandise than usual. Executives said the 14% increase in year-end inventory reflected goods that were held up in the spring of 2020 when stores were closed, as well as items that were stranded by delays at ports, as well. than masks and hand sanitizers the company plans to sell this year.
“Our year-over-year shrinkage inventory is well below last year’s levels,” Katrina O’Connell, CFO of Gap, said in an interview. “We are convinced that the assortments in the first half of the year will allow us to continue to expand our product margins.”
Ms Syngal said the company has spent more than $ 150 million to make stores safer during the pandemic and expects that spending to reduce in the second half of 2021, as vaccines become more widely available.
Gap reported online sales of $ 6 billion for the fiscal year ended Jan. 30, which represented 45% of total sales for the year. Digital accounted for 25% of the retailer’s business in 2019. The company closed 228 Gap and Banana Republic stores in 2020 and plans to close around 100 this year.
For the fourth quarter, Gap reported a profit of $ 234 million, compared to a loss of $ 184 million for the same period a year earlier. Earnings per share amounted to 61 cents, including 45 cents of non-recurring tax benefits and an impairment charge of 12 cents related to the Intermix business resulting from a strategic review. Net sales fell 5% to $ 4.4 billion.
Write to Charity L. Scott at [email protected]
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Appeared in the print edition of March 5, 2021 under the title “Gap CEO Predicts Apparel Rebound”.