Gap Brand Still Slowly Dying

Gap Inc. (NYSE: GPS) reported a surprise improvement in sales for June. The company has been battered by falling same-store sales and the shuttering of locations off and on for several years. Part of the news released by Gap was that the sales of its core, flagship brand continue to drop.

The corporate improvement had both revenue and store performance components. The retailer announced:

[N]et sales for the five-week period ended July 2, 2016 increased 2 percent to $1.57 billion compared with net sales of $1.54 billion for the five-week period ended July 4, 2015.

Also:

Gap Inc.’s comparable sales for June 2016 were up 2 percent versus a 1 percent decrease last year. Comparable sales by global brand for June 2016 were as follows:

• Banana Republic Global: negative 4 percent versus positive 1 percent last year
• Old Navy Global: positive 5 percent versus positive 1 percent last year

[nativounit]

Old Navy continues to carry the company. Gap’s sales have yet to recover and, based on past performance, they will not.

The demise of Gap sales has been largely blamed on three things. The first is that the largest department stores and big-box retailers have introduced Gap-like lines of clothing. The next is that smaller versions of Gap, which include American Eagle Outfitters, have siphoned off sales. The last is the Gap cannot compete with Amazon.com, which puts it in a league with almost all other brick-and-mortar retailers with websites that get only modest traffic.

Notably, Gap’s stock price has fallen 47% in the past two years.

Gap continues its retreat, among the most recent signs of which was last year’s announcement that it would close 175 stores. A declining retail location footprint can only mean one thing: Gap has lost a great deal of relevance among consumers. Nothing it has done recently offers any evidence the trend will reverse.

The end of Gap may not come this year, or even next year. However, it is not far off.

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