- Gap Inc. on Thursday said that Old Navy Chief Financial Officer Katrina O'Connell will move up to become the company's CFO effective March 23, succeeding Teri List-Stoll who has served in the role since 2017, according to a press release. As of that day, Old Navy Chief Creative Officer (and former Athleta chief) Nancy Green will serve as Old Navy CEO while the company searches for someone to fill that role permanently, as brand chief Sonia Syngal takes the reins at Gap Inc.
- In a conference call with analysts Thursday, List-Stoll hinted that the company is contemplating whether its namesake even belongs in its stable. "I think the thing we would all say, and we've been saying this for a little while, is that we will be very objective in evaluating that brand and what we need from that brand to really earn its way in the portfolio," she said. "We continue to believe, given the missteps, that we haven't really tested the brand to understand what the possibility is there. But we have a high degree of urgency to address the profitability."
- And, in a statement emailed Thursday to Retail Dive, the company said it will keep paying any employee diagnosed with COVID-19, a disease caused by a member of the coronavirus family, and that employees at any stores that may temporarily close due to the outbreak will continue to be paid. The company has also "strongly encouraged" employees at corporate offices in New York and the Bay Area to work remotely until March 31.
Gap Inc. showed some signs of life in the fourth quarter, but Syngal nevertheless has her work cut out for her as she assumes the chief executive position later this month.
"As the new CEO, Sonia Syngal, and announced CFO Katrina O'Connell (both from Old Navy) take charge of the entire GPS family, they can move forward in unison and put the separation behind them," Wedbush analysts led by Jen Redding, (who had previously frowned upon the plans to spin off Old Navy and suggested Syngal take the lead at the wider company), said in emailed comments. "With the management team solidifying, the outlook remains unclear in the COVID-19 global environment."
Indeed, executives on Thursday noted traffic declines in the first quarter that promise to only worsen as COVID-19 precautions keep consumers away from stores and malls, although List-Stoll noted that Gap Inc. enjoys strong e-commerce sales that could help mitigate that. The company left out possible blowback from the outbreak, leaving Wells Fargo analyst Ike Boruchow to speculate in an emailed comment note that their guidance for the current fiscal year will prove to be overly optimistic.
Gap Inc. Q4 performance
|Net sales||$4.7 billion||+1%|
|Global Old Navy comps||flat||-|
|Global Gap brand comps||-5%||-|
|Global Banana Republic comps||flat||-|
|Gross margin||35.8%||+20 bps|
|Net loss||$184 million*||-166%|
|Gross profit||$1.67 billion||+2%|
Source: Gap Inc. press release*includes an impairment charge of $296 million related to flagship store assets and operating lease assets
The company's star player, Old Navy, had a bad year last year — full year comps globally dropped 2% versus its 3% rise in 2018 — something that helped scuttle plans to spin it off. Even as that discounter seemed to recover at the end of the year, as its performance in the fourth quarter helped push both revenue and profit past analyst estimates, the namesake brand continues to falter, with little sign of benefit from its former glory as a casual apparel icon.
For the first time, Gap Inc. on Thursday reported comp sales for Athleta, its fast-growing activewear brand, upon which executives, in a conference call Thursday, said they are pinning much of their hopes for the company's future success. Credit Suisse analyst Michael Binetti noted that with interest, saying in an emailed client note that "our hunch was that [Gap Inc.] could start to position Athleta as a key value driver," but warning that the brand "has some work to do" if it hopes to catch Lululemon, considering how Athleta's comps rise pales compared to its rival's likely high-teens to 20% increase in the metric in the same quarter.
The company plans to shutter about 230 specialty stores by the end of the year, 170 of them Gap locations, executives told analysts during a conference call, saying mall stores have largely lost their marketing purpose. While Gap will see its fleet shrink further in favor of saving money and pushing online sales, Old Navy and Athleta are set to get new stores; executives said the activewear brand will likely open 20 this year.
With all its struggles, however, the Gap brand has been mostly successful in moving stores out of traditional malls and into off-mall shopping centers, unlike other retailers attempting the same feat, Nick Egelanian, founder and president of retail real estate firm SiteWorks, told Retail Dive in a phone interview.