While Gap reported preliminary Q3 sales results that exceeded Wall Street expectations, with revenue falling marginally from $3.86 billion last year to $3.8 billion in 2016, the retailer’s weak points have prevented it from making any significant headway on a turnaround.
Gap brand sales have declined for 10 straight months, whereas Banana Republic sales have fallen for twice as long — 20 straight months. Old Navy is the only brand that has consistently brought in positive sales for the retailer, but its revenue contribution hasn’t quite been able to cancel out the poor performance of its sister brands.
Across all three of its brands, Gap’s Q3 comparable sales dipped 3%. During the quarter:
Gap Global comparable sales decreased 8%;
Banana Republic Global comparable sales also dipped 8%; and
Old Navy Global comparable sales increased 3%.
In discussing the results, the retailer’s executives made a point of highlighting that a fire had broken out in its Fishkill, N.Y. distribution center in August, negatively impacting comparable sales in October and for Q3 as a whole.
This warehouse supplies Gap and Banana Republic merchandise to online and store customers primarily in the Northeast and represents approximately 10% of the company’s nationwide warehouse capacity, giving weight to the idea that slow fulfillment could have affected a good portion of consumer purchases.
But beyond any recent DC-related catastrophes, the Gap brand still has a lot of work ahead, and it will have to be done with a new CFO. Sabrina Simmons, the brand’s finance chief since 2007, is leaving her post in January 2017.
With less revenues coming in, Gap appears to be making its first major cost-saving measures by scaling back its global footprint with the closing of 75 Old Navy and Banana Republic stores overseas in 2016. Gap had previously announced it would close all 50+ Old Navy stores in Japan after Q1, and in October the retailer decided to shutter all eight of its UK-based Banana Republic stores.