Gap: Nightmare week of falling sales and ad contoversy

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Banana Republic SS16

Not much seems be going right for Gap this week. Earlier it was the controversy about the is-it-racist-or-isn’t-it ad (what really got me is that nobody at Gap or its agency spotted the controversy potential in advance and that they let an ad through in which its ‘models’ looked so miserable). Now it’s the even bigger issue of same-store sales.

Gap turned in its 12th consecutive monthly fall yesterday and said it was going into April with higher stock levels that could hurt margins.

Comparable sales fell 6% year-on-year (worse than analysts had expected) with Gap brand comps down 3%, ailing Banana Republic down 14% and even once-buoyant Old Navy down 6%.

Total sales fell 6.5% to $1.43bn, proving that the company is still shifting an awful lot of product. But that counts for little given that those kind of cops falls can devastate profits.

Like M&S in the UK, Gap has been in hoped-for-turnaround mode for more years than many of us can remember and this leads analysts to wonder whether its basic business model can ever get it back, in the modern retail environment, to the dominant position it once had.

Personally, for both Gap and M&S, I don’t think the glory days will ever be regained as retail (and the consumer) is so different today. But that doesn’t mean both can’t be hugely profitable businesses if they can just get the strategy right.

The man charged with that task at Gap is Art Peck, the latest in a succession of business and creative execs who’ve being doing the modern equivalent of trying to find the Philosopher’s Stone (the legendary alchemical substance said to be able to turn base metals into gold).

Peck, who’s been CEO for little over a year, had earlier said he expected to see a revival come spring. But spring doesn’t seem to have sprung yet at the company, which is offering discounts of 40% to 50% at Banana Republic quite early in the season.

Advertising nightmare

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Gap’s controversial ‘racist’ ad

Mid-week also saw bad news for the company with a gap Kids ad setting off a social media storm amid racism accusations. At issue was an image that showed a tall white girl resting her elbow on the head of a smaller, not-very-happy-looking black girl. The ad replicated a theme Gap had visited some years before with the black/white roles reversed.

Personally, I think racism accusations are very unfair. But there are issues here, one around extreme over-sensitivity and the other around quality control at brands. Nowadays, brands have to be very careful not to show some groups of people in what just might be perceived as an oppressed position. But what that can often end up as is the former oppressor becoming the oppressed.

We see it every day with household goods and supermarket ads where, in an attempt not to patronise women, men are frequently shown up as stupid/useless/objects of derision.

I’m not going to debate the rights and wrongs of that here. But I do wonder how an ad that must have gone through so many people’s hands should never have set off any alarm bells. Did nobody at any point even say “the girl in the Love T-shirt looks miserable”? That’s the question I’d like to answered!

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An earlier Gap ad with the roles reversed

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