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In first half of year, Gap faces excess inventory

Gap performed poorly in the first half of the year. The operating model improvement process at the company’s namesake brand has been fraught with inventory problems. As a result, the company was saddled with excess inventory coming into the first quarter, which consequently impacted the company’s sales from this brand as well as its ability to optimize its margins, since it forced the brand to be more promotional.

Overall gross margins fell 10 basis points in Q2. Looking ahead, the company has cut 30 per cent styles heading into the second half of the financial year, which should help to improve the performance.

The company has one platform for all of its brands, ensuring customers can purchase items for any of them in one place. This has also ensured its new brands get the recognition that would not have been possible if they had had a separate web presence. An upshot of this is that the company was able to deliver strong growth from its online and mobile channels in the second quarter. The company has also focused its investment into the native mobile apps and on improving site speed. These factors should ensure the growth of this segment in the future.

 

 
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