Total sales for the second quarter of 2017 decreased 2.7 percent to $311.0 million, while comparable store sales decreased 5.0 percent. Ecommerce sales were up 41 percent over last year's second quarter. For the first six months of 2017, total sales decreased 4.0 percent to $648.4 million, while comparable store sales decreased 6.4 percent. Gross profit for the second quarter of 2017 was $64.7 million or 20.8 percent of sales compared to $89.4 million or 28.0 percent of sales in 2016. Gross profit for the first six months of 2017 was $160.2 million or 24.7 percent of sales compared to $198.3 million or 29.4 percent of sales in 2016. The lower gross profit rate for both periods reflects much higher markdowns and to a lesser extent higher occupancy costs that negatively leverage on lower sales. Click Read More below for additional detail.
Gap Inc. (NYSE: GPS) today announced a series of strategic actions to position Gap brand for improved business performance and build for the future. Following a thorough evaluation of its business and operations, Gap plans to right-size its specialty store fleet and streamline its headquarter workforce, primarily in North America, as part of the comprehensive effort to deliver more consistent and compelling product collections and engage customers across all channels.
“Returning Gap brand to growth has been the top priority since my appointment four months ago – and Jeff and his team bring a sense of urgency to this work,” said Art Peck, Gap Inc. chief executive officer. “Customers are rapidly changing how they shop today, and these moves will help get Gap back to where we know it deserves to be in the eyes of consumers.”
In order to drive productivity improvements and showcase the brand in the most successful locations, Gap will close about 175 specialty stores in North America over the next few years, with about 140 closures occurring this fiscal year. These changes will not impact Gap Outlet and Gap Factory Stores. In parallel with these moves, the brand will close a limited number of European stores during this period.
Following the fleet optimization effort, the brand will continue to serve North American customers through about 800 Gap stores – comprised of 500 Gap specialty locations and 300 Gap outlet stores – as well as its dynamic online channels, better reflecting the way today’s customers shop across specialty, outlet and online. The brand will continue to have a robust global presence in more than 50 countries and with about 1,600 company-operated and franchise locations globally.
“Our customers and employees want Gap to win,” said Jeff Kirwan, global president for Gap. “We’re focused on offering consistent, on-brand product collections and enhancing the customer experience across all of our channels, including a smaller, more vibrant fleet of stores.”
Since Kirwan was appointed to lead Gap in December 2014, he’s rebuilt the leadership team and implemented an aggressive agenda designed to strengthen the brand and successfully compete on the global stage. The team is driving towards a clear, on-brand product aesthetic framework focused on optimistic and elevated American style, while also rebuilding the brand’s product operating model to increase speed, predictability and responsiveness, and enable greater competitiveness.
To speed decision making and responsiveness, Kirwan also announced decisions meant to align Gap’s organization in support of its new product operating model. This will result in the reduction of the brand’s headquarter workforce, primarily in North America, by approximately 250 roles during fiscal year 2015.