Gap Global Shows No Signs Of Improvement
Gap Global has struggled over the last few years and has delivered negative comp growth over this period – a trend which continued into Q3. The brand’s comp sales figure fell 7% in Q3 - identical to a 7% reduction in the prior-year period.Total revenues declined by 10% y-o-y to $1.1 billion. Weakness across the brand can be attributed to operational headwinds in the business as well as to assortment issues. Nevertheless, the brand’s profitability improved in the quarter thanks to an increase in gross margin from its ongoing efforts to cut costs.Gap continues to work towards revitalizing the brand along with its restructuring efforts. The company has closed more than 70 stores in the first nine months of the year and expects to close 60 more over the last quarter. In addition, the company remains focused on improving its inventory composition and product assortment.
Old Navy’s Growth To Slow Down
Old Navy is the company’s largest brand-accounting for nearly half of the company’s revenues. However, the brand’s growth has slowed down in 2019 with the brand delivering negative comparable sales growth in each of the last three quarters.Old Navy’s comparable sales were down 4% in Q3 - in sharp contrast to a 4% increase in the previous-year quarter.Moreover, the brand’s revenue remained flat at $2 billion.Old Navy's performance struggled because traffic trends remained soft due to its limited product offerings. However, online trends for the brand remained strong as the brand delivered double-digit growth in traffic and conversion during Q3 2019.For full-year 2019, we expect the brand’s revenue to increase by 2% to just shy of $8 billion.
Athleta Brand Continues To Thrive
The 'Athleisure' segment remains a major growth driver for the apparel industry. Gap’s Athleta brand delivered a strong performance in Q3 2019, further improving its market share, with the Girls business continuing to be a consistent growth lever, delivering another double-digit comp quarter.Athleta has been Gap's fastest-growing segment of late, and we expect the momentum to continue through Q4 and beyond. Moreover, the company has opened 24 new Athleta stores so far this year and plans to add another 6 stores in Q4 2019 which should support the brand’s growth momentum.