Note: Gap's FY'21 ended on January 29, 2022. Q1 FY'22 refers to the quarter that ended on April 30, 2022.
Gap is a global specialty retailer offering clothing, accessories, and personal care products for men, women, and children. It markets its products under the Gap, Old Navy, Banana Republic, Athleta, GapKids, babyGap, and Intermix brands.
Gap operates stores in North America and several countries in Europe and Asia. It is one of the few U.S. apparel retailers who have a decent international presence. The company also sells its products online through web-based stores for each of its brands. The company has recently changed its reporting structure due to its adoption of omnichannel retailing. It no longer reports separate e-commerce revenues but includes them in individual brands' revenues. In addition to this, Gap has franchise agreements with unaffiliated franchisees to operate Gap, Old Navy, and Banana Republic stores in many countries.
The retailer operates three different brands for three main demographics: Old Navy for cost and fashion-conscious teenagers, Gap for young adults, and Banana Republic for more affluent and relatively older customers.
An omnichannel platform enables retailers to engage customers irrespective of the shopping channel they prefer. A while back, Gap Inc. launched its ship-from-store service, which allows the fulfillment of online orders through store inventories. This service not only enables the company to offer a greater variety of merchandise over the Internet but also helps it improve delivery responsiveness and store traffic. A couple of years back, Gap Inc. launched “find in store” and “reserve in store” services to enhance its customer service and integrate the digital and store channel. The “find in store” function informs the customers where to find the nearest stores and the “reserve in store” service allows them to reserve up to five items online to try in stores. Since buying clothes is a personal experience and online shopping provides convenience, this offers customers the best of both channels. Encouraged by the pleasing response, the company expanded its “reserve in store” to all Gap Stores in the U.S. in 2014. In addition, it began testing a new order in-store capability later in the year, which gives customers instant access to expanded merchandise offerings over the Internet.
Online retail sales in the U.S. have grown at a rapid pace over the past several years, thanks to growing internet usage in the country. Internet penetration in the U.S. has gone up from 44% in 2000 to 89% in 2020. Furthermore, facilitated by the convenience of constant access, 92% of teens today go online daily, including 24% who are online constantly, according to a study conducted by Pew Research Center. Over half of the teens (aged 13 to 17 years) go online several times a day, aided by the presence of smartphones, which are available to nearly three-quarters of teens. Smartphone usage will only increase in the future, and this will likely result in a steady rise in online sales. This is evidenced by research that predicts.
While Gap Inc. is consolidating its main brand networks in North America, it is looking at other ways to gain share in the U.S. apparel market. The retailer is relying on smaller brands for this purpose, such as Athleta, Intermix, GapKids, and babyGap, to grow its business in North America. Through Athleta, Gap Inc. offers performance-driven sports apparel and footwear for women. In line with its growth strategy detailed during FY 2019, the company expects store openings to be focused on Athleta and Old Navy, with closures weighted toward Gap and the Banana Republic.
Gap Inc. has continued the process of optimizing its store count, including reducing its exposure to low-productivity stores. The company has also seen an opportunity for increasing the store count of Athleta, Old Navy, and the factory and outlet expressions at the Banana Republic and Gap. Consequently, in FY 2021, the company saw net openings of 32 Old Navy stores and 28 Athleta stores and continued to close under-performing Gap and Banana Republic stores in North America.