Retail

Can Gap's New Long-Term Strategy Pay Off?

Chris Lange

Published: September 6, 2017 12:15 pm

Last Updated: January 12, 2020 8:28 am

Shares of Gap Inc. (NYSE: GPS) saw a handy gain on hump day after what seemed like a dismal summer for most retailers. What’s pushing this stock higher is a new long-term plan that the executive management team has put together. Investors seem pretty thrilled about this plan, but will it succeed?

There are a few moving parts that will happen over the next few years, according to this plan, but perhaps the biggest change to the corporate structure is the addition of 270 Old Navy and Athleta stores and the closure of about 200 Gap and Banana Republic stores.

Management said that it will have a continued focus on its growth brands. Old Navy and Athleta are the top brands for the retailer, and over the coming years management expects to see net sales rise by $10 billion and $1 billion, respectively.

Also over the next three years, Gap will accelerate its investing efforts in areas including direct fulfillment capacity, loyalty, personalization, omnichannel services, artificial intelligence and other data-driven customer experiences. Expanding its e-commerce platform should enable for more cross-brand shopping, and even a new personalization engine founded on customer data.

Art Peck, president and CEO of Gap, commented:

Over the past two years, we’ve made significant progress evolving how we operate – starting with getting great product into the hands of our customers, more consistently and faster than ever before. With much of this foundation in place, we’re now shifting our focus to growth. We will leverage our iconic brands and significant scale to deliver growth by shifting to where our customers are shopping – online, value and active.

Although Gap is positive on the year so far, it still has a ways to go to reach its levels from 2014 when this was a $45 stock. Now is the time for most retailers to reevaluate their positions after a brutal summer, and it seems that e-commerce/omnichannel seems to be the general consensus for expanding their brands. Gap’s plan might sound good on paper, but there is still much to be said for the competition in the retail space.

Shares of Gap were last seen up about 5.5% at $25.34 on Wednesday, with a consensus analyst price target of $25.41 and a 52-week range of $21.02 to $30.74.