By  on May 20, 2005

NEW YORK — Gap's women's wear business is a work in progress.

After Gap Inc. delivered a self-described disappointing — though slightly better-than-expected — 6.7 percent decrease in first-quarter profits Thursday, management said it is committed to improving its merchandise mix, which includes returning Gap's women's business to the classic, iconic looks that put the retailer on the map.

"We understand the issues in each of our businesses, and our teams are making the necessary changes to improve," said Paul Pressler, president and chief executive officer of Gap, on a post-earnings conference call with investors and analysts. "At Gap we are pleased with the progress we've made in the men's business but are not yet satisfied with our women's products. In our efforts to serve more occasions for women, we broadened our merchandise and design perspective, going a bit outside Gap's iconic style aesthetic."

In the quarter ended April 30, the San Francisco-based company earned $291 million, or 31 cents a diluted share, a penny ahead of analysts' estimates for 30 cents. Comparatively, Gap earned $312 million, or 33 cents, in last year's first quarter.

Quarterly net sales decreased 1.1 percent to $3.63 billion from $3.67 billion last year, while consolidated same-store sales were down 4 percent.

In order to improve results at Gap, Pressler outlined three areas the brand will focus on during the rest of the year:

  • Adjusting the fall and holiday assortment "to improve our color and fabrications."

  • "Visually merchandising" products that best represent the Gap brand: white jeans, bright colored layering tanks and metallic accessories. Those trends are "interpreted as clean, current, casual and versatile across occasions," Pressler said.

  • Expanding the company's "new customer experience" concept stores, which recently launched in seven Denver locations, to a fall rollout of 10 stores in the Hartford/New Haven, Conn., market and five stores in San Diego. The seven Denver stores have a sharper delineation of the genders, including separate entrances into the women's and men's departments, merchandise that is subdivided into a gallery of shops, and denim is in the rear.
"Anecdotally, we're hearing positive feedback from Denver customers, who tell us that the stores look and feel fantastic. They've been especially excited about denim, which is showcased in the new store design. We are encouraged by strong average unit retail transactions, fitting room usage is up considerably, and customers are spending more time in the stores on each visit," Pressler said.

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