Gap Inc. turns 50 this year and is getting a facelift to celebrate its birthday.
President and CEO Art Peck, giving a keynote presentation before several thousand attendees at Shoptalk Monday afternoon, walked through the company’s history and its near-term future. He provided a bit of context around the company’s recent activities, including the planned spinoff of the Old Navy brand and the purchase of Janie and Jack, a kidswear retail brand.
Gap announced the latter purchase Monday. Gap purchased the digital and store assets of Janie and Jack at auction for $35 million from Gymboree Inc., which went out of business this year after filing for bankruptcy. Gap will operate JanieandJack.com. The purchase price included more than 100 Janie and Jack stores. Peck welcomed the brand into Gap’s fold as the seventh brand in Gap’s portfolio but said nothing more about the purchase.
Gap’s portfolio, however, will be smaller in about 12 to 18 months—the time frame Peck expects it to take to separate Old Navy into its own company. Peck said Old Navy is an $8 billion brand today, with expectations it will soon reach $10 billion. Old Navy accounted for about 47% of Gap Inc. revenue last year.
He said the $1 billion Gap Inc. spends annually on infrastructure, technology investments and logistics across its brand portfolio is too unfocused to meet the needs of all the brands. Spinning off Old Navy will give Gap Inc.’s investments more focus. Beyond the namesake brand and Old Navy, the other brands currently in Gap’s portfolio are Banana Republic, Athleta, Intermix and Hill City. Peck said the separation will make Old Navy and the other Gap brands “stronger than ever.”
Peck outlined several other factors driving the 50-year-old company today, the first being serving what he called the “converged customer.” That is, the customer who expects a seamless experience no matter the channel shopped. Yet, he said, many retailers serve up a diverged set of experiences. One way Gap addresses this is by showing online customers available inventory across its full network in real time. This also helps maintain Gap’s margins because it can connect inventory where there is the greatest demand, limiting the need for markdowns.
Peck also addressed the company’s strategy for opening Gap stores. “I just closed 230 Gap stores last week,” he said. “Those were the wrong stores in the wrong locations.” The plan now is to place the right stores in the right locations—meaning not in malls with low foot traffic and conversions. “Traffic in malls is not productive,” Peck said.
Gap recently opened a store in Encinitas, California. It is a smaller-format store next to a Trader Joe’s grocery store, the point being to put a store where customers are already shopping. “We are inserting a store into her life,” he said. The location doesn’t get a ton of foot traffic, Peck said, but the store converts shoppers at a rate of two to two-and-a-half times the rate of Gap stores in malls.
Gap is at the beginning stages of applying big data and analytics to improve services across the board, including optimizing inventory per store—such as stocking the sizes and styles in the right amounts based on what it can see from its data about that market. “We’ve only scratched the surface [of what we can do with data],” he said.
Considering Gap’s 50 years in retail, Peck said many brands “burn hot and burn out.” For Gap to continue, Peck said, Gap must change or fail.
Gap is No. 20 in the Internet Retailer 2018 Top 1000.
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