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How Gap sales moved online as most of its stores closed against coronavirus

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Gap’s parent company has reported a 43% drop in sales in a first quarter when about 90% of stores closed to protect against the coronavirus outbreak.

As shops closed, the retail group turned online instead, scaling up an ecommerce platform responsible for about 25%, or $4bn, of Gap Inc’s total $16.9bn sales in 2019. Shoppers buying online from Gap can buy online for home delivery, to pick up in store – where shops are open – when they can also order in-store for home delivery or collection. The group is to expand its Ohio distribution centre at a cost of around $30m during the current financial year, part of the reduced $300m capital expenditure planned for the year.

Online sales at Gap Inc. rose by 13% year-on-year in the first quarter of the year, to May 2. In April, ecommerce sales were up by 40%  But in May alone, online sales grew by more than 100%.

Meanwhile, first-quarter store sales were down by 61%, as about 90% of Gap Inc’s 3,911 stores in 42 countries closed during the Covid-19 lockdown. Overall, sales during the quarter came in at $2.1bn, down from $3.7bn a year earlier. Pre-tax losses came in at $1.3bn from a profit of $302m a year earlier. 

“Our teams’ ability to pivot quickly and lean into our strong online business resulted in an encouraging 40% online sales growth in April,” said Sonia Syngal, president and chief executive of Gap Inc. “This online momentum, enabled by new omni-capabilities that have expanded the way customers can shop with us, leaves us well-positioned to fuel our brands going forward.”

The retailer now has more than 1,500 shops open in North America – where shops started to open up from May 9 – and expects to have the “vast majority” of shops in that market open in June. there. There are more than 100 Gap shops in the UK, where non-essential retailers can reopen from June 15. 

Katrina O’Connell, EVP and CFO of Gap Inc., said: “While we are pleased that store traffic and productivity is exceeding expectations, particularly at Old Navy and Athleta, we continue to plan conservatively as significant uncertainty remains ahead. We intend to lean into our best-in-class supply chain and advantaged omnichannel capabilities to respond as customer demand becomes clearer.”

Among the company’s brands, Gap first-quarter net sales were 50% down on the same time last year. Store sales were down by 65% and online sales down by 5%. “Prior to the onset of the pandemic, Gap brand performance continued to be pressured by inconsistent execution of product and marketing messages,” Gap Inc said in its first-quarter figures statement. “However, the company noted the brand did experience steady improvements in its online performance throughout the quarter, attributable to the company’s strategy to migrate customers online as the brand’s fleet rationalisation efforts continue.”

Sales at Banana Republic were down by 47%, with stores sales 61% down and online sales down by 2%. However, Athleta sales were down by a net 8% as store sales fell by 50% but online sales grew by 49%. “Customer response to Athleta was strong given the values-driven act and lifestyle space the brand participates in as well as the brand’s deep customer engagement through its powerful omnichannel model.”

The retailer said that it suspended its rent payments for closed stores from April and is currently in discussions with landlords. However, it does reflect the cost of rent payments in its first quarter figures for accounting purposes.

Gap is a Top250 retailer in RXUK Top500 research, while Banana Republic is Top350.

Image: Fotolia

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