Last week, The Gap Inc. released its fiscal results for Q2 2023 ending in June. The lifestyle conglomerate ended the quarter with cash and cash equivalents of $1.4 billion, an increase of 91 per cent over previous year. A dive into details of fiscal performance shows in most segments, decrease is the common word, however slight that may be.
A look at Q2 results showed net cash from operating activities was $528 million, year-to-date; net cash from operating activities less purchases of property and equipment, stood at $329 million. Also at the end of June, the ending inventory of $2.23 billion was down 29 per cent compared to last year. The year-to-date capital expenditures were $199 million. The corporation paid its second quarter dividend of $0.15 per share. Additionally, the board of directors agreed the paid dividend in the third quarter would be the same as the second quarter. It must be noted that the company’s annual yield in 2022 was 5.8 per cent.
GAP, the all-American clothing brand founded by Donald and Doris Fischer in San Francisco in 1969 is a symbol of American informal urban wear worldwide. The Gap Inc. is its formal name and under it are equally famous American high street fashion brands: GAP, Old Navy, Banana Republic and Athleta.
Not so positive quarter
In Q2, Net sales saw a decrease of 8 per cent compared to last year at $3.55 billion while end of March 2023, the first quarter net sales was down by only 1 per cent. This downslide includes the 2 per cent point decrease in GAP’s China sales and a 1 per cent point decrease due to foreign exchange challenges.
Comparable sales, also referred to as same store sales was down by 6 per cent, a further decline of 3 per cent compared to the first quarter of the year that ended in March. The report states online sales went down by 11 per cent this quarter compared to last year and contributed one-third of total net sales. Store sales decreased 7 per cent compared to last year. The company ended the quarter with 3,456 store locations in over 40 countries, of which 2,592 were company operated.
In March 2023, The Gap Inc. had confirmed the closure of around 350 US stores by the end of 2023 and to date and it has officially closed 120 Banana Republic and 175 GAP stores across the country. A leading US-based reputed business journal had pointed out in May 2023 a general downturn of purchases from The Gap Inc’s lower end consumers worldwide was a key factor and the company despite management change at the beginning of 2023 has not been able to cater to this customer segment to drive sales. Additionally, all four brands under The Gap Inc., seem to suffer from poor choices in merchandising and procurement. The saving grace so far has been women’s wear for The Gap Inc. brands.
Indeed, for the last two decades, the American clothing giant has tried hard just one thing as its panacea for everything – change in senior management. Did it work? Not really as all four brands are steadily losing the “all wholesome American” appeal for newer generations and instead of changing its positioning, its product portfolio and aligning with pop culture, yet another CEO, Richard Dickson is ready to play. Brand relevance doesn’t seem a priority.