Jeans May Drag Gap into a Holiday Hole
Gap (GPS) said a tops assortment that didn't cut it with customers led to slow sales and weak result sin the second quarter. Yet underlying the problem may be peaking interest in jeans -- an issue that could create big problems for the retailer's holiday push.
Denim, including jeans and tops styled to accompany them, enjoys cyclical popularity, and Gap executives appear concerned that the cycle is turning against them. During a recent company conference call, they were as anxious to talk about uniform initiatives at Old Navy and the launch of black and sport pants at Gap stores as they were about the jeans. And since 1969 Premium jeans launched successfully last summer, denim has been their darling. Strong consumer response to 1969 Premium helped turn around negative comparable store sales, those at stores open for at least a year, in the first quarter. Then comps were up two percent at Gap stores, but they're on the skids again.
The results hint that Gap could tumble through the holidays, and more evidence that the company faces a problem comes out of its Old Navy division. The lower price chain was the company's stalwart in the recession based on the availability of inexpensive denim-oriented fashion including jeans and compatible tops. But comparable store sales gains at Old Navy slowed to two percent in the latest quarter. That's after comps increased by seven percent in the final 2009 quarter, when all the other company's divisions stumbled, and by a like amount in the first quarter of 2010 when Old Navy led a Gap resurgence.
If tops were the problem with Gap, consumers looking for alternatives might have traded down to Old Navy. But the numbers suggest no such move occurred. It is also noteworthy that Banana Republic had the best comp performance of Gap U.S. divisions, and it is the least denim-associated of the company's operations.
For fall, Gap intends to add new embellished 1969 jean styles. Among the upcoming introductions for women are products lines such as Zip Crop Always Skinny, Wing Graffiti Always Skinny and Graphic Cuffed Real Straight jeans for women, all starting at $69.50. Apparently, the funky names are sufficient to justify charging 10 bucks more for the new products versus the original collection of 1969 Premium jeans. If interest in denim is peaking, Gap had better hope it plateaus through the holiday when it intends to add jeans and pricier jeans at that. If consumers decided to take another fashion direction, Gap could experience real sales deterioration in the holidays.
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