NEW YORK — Come October, Gap Inc. will be expanding its offerings — in plastic.
As the San Francisco-based company reported a marginal decline in earnings for the second quarter, president and chief executive officer Paul S. Pressler unveiled plans for a new credit card program, offering customers a choice of newly designed Gap, Banana Republic or Old Navy cards that will allow holders to earn points redeemable at any of the company’s stores.
“The consumer proposition is simple,” said Pressler during the call, “one credit card to shop, earn points and redeem rewards across all three of our brands, including online and outlet stores.”
According to Pressler, current cardholders spend almost twice as much as other customers. They are also more likely, said Pressler, to shop at sister stores, with 65 percent of Gap cardholders saying they also shop at Old Navy or Banana Republic. For Banana cardholders that number shoots up to 75 percent. “We see a significant opportunity to drive sales by encouraging cardholders to purchase within Gap Inc.’s family of brands,” said Pressler. The launch date for the credit card program is Oct. 11.
While the new credit card initiative and the Sarah Jessica Parker ad campaign could be a boon for fall, second-quarter results were hampered by a dropoff in sales during June and July, as well as the company’s continued efforts to reduce its hefty debt load.
For the three months ended July 31, the retailer saw earnings slide 7.2 percent to $194 million, or 21 cents a diluted share, in line with Wall Street’s consensus estimate. Comparatively, the company reported earnings of $209 million, or 22 cents, in the year-ago quarter.
Sales inched up 1 percent to $3.72 billion from $3.69 billion. Sales at Gap remained flat at $1.2 billion while Old Navy retained its place as the company’s top revenue generator, with sales rising 6.7 percent to $1.6 billion from $1.5 billion. Banana Republic sales rose 6.2 percent to $528 million against sales of $497 million.
Kinks are still being worked out, according to Pressler. “At Old Navy our summer circulars were timed too close together, and we also feel we have an opportunity to better differentiate our marketing messages.”International sales continued to underperform, falling 4.9 percent to $445 million compared with sales of $468 million.
“Our strategic decision to reduce overall promotional and markdown activity partially contributed to the deterioration of traffic during the quarter,” said Byron H. Pollitt, chief financial officer. Pollitt also said the company closed all 10 of its locations in Germany during the quarter.
Despite the downturn, analysts remained confident in management’s leadership, but did note a lack of newness at Gap and Old Navy, as well as a late start to summer clearance activity.
“Although June and July same-store sales were disappointing, we remain impressed with the company’s margin improvement strategies, inventory management and discipline,” said Goldman Sachs analyst Margaret Mager in a preview of earnings. “We believe that management’s prudent approach to managing its business reduces earnings volatility and bodes well for the long-term health of Gap and its brands.”
The firm took a $65 million hit related to early retirement of debt, paying down $303 million to end the quarter with $2.3 billion in debt.
Better sales performance and lower interest expenses overcame early debt retirement issues for the first half.
For the first six months to date, earnings advanced 22.8 percent to $506 million, or 53 cents, against earnings of $412 million, or 44 cents, while sales rose 5 percent to $7.39 billion from $7.04 billion.
There'll be no rest for those headed to Europe for men's, as Paris just closed the gap with Milan. According to a provisional calendar released by the Chambre Syndicale, Paris Men's Week will now open a day earlier on January 16. See new highlights on the official lineup on WWD.com. #wwdnews #wwdfashion (📷: @kukukuba)
BREAKING: Jonathan Saunders is leaving @DVF. The designer has resigned from his position as chief creative officer of Diane von Furstenberg, the company said in a statement on Friday. At the time of his hire, von Furstenberg said Saunders’ arrival symbolized and facilitated her stepping back from the day-to-day duties that occupy the work of a full-time creative director. The British designer joined DVF in May 2016 and was in charge of all product categories. #wwdnews
For @versace_official’s spring ad campaign, the brand emphasized the archival prints from the spring tribute collection dedicated to the late Gianni Versace. Closing out the show were five of Gianni’s favorite models: Cindy, Naomi, Carla, Helena, and Claudia. Bowing on December 18, the new campaign is yet another tribute to supermodel-dom as the images by Steven Meisel are fronted by @iamnaomicampbell, @cturlington, @gisele and more. #wwdfashion
Four-time Oscar-nominated actress Annette Bening has been waiting 20 years to play Gloria Graham in "Film Stars Don't Die in Liverpool," which will be released on December 29. The movie about Graham – a Hollywood star known for her controversial relationship with a younger Englishman named Peter Turner – is based off a memoir Turned wrote. "She felt vulnerable to him, because she loved him, she really did love him. And anyone that we really truly are in love with, we re vulnerable to in a very deep way," said Bening. Read our full interview with the modern icon of an actress on WWD.com. #wwdeye (📷: @ninebagatelles; Styled by @cristinaehrlich)
The crisp white button down: a staple that can be dressed up or down and accessorized throughout the decades. Here, on a Art Basel-goer in 2017 on the left and on the iconic Audrey Hepburn in “Roman Holiday” in 1953 on the right. #tbt #wwdfashion (📷: Andrew Morales)
Known for her work with @victoriassecret, 25-year-old model @georgiafowler is raising her profile in Hollywood. Fowler stars in @vincecamuto’s holiday campaign, which launched in partnership with “Pitch Perfect 3.” “Almost every shoot with Vince Camuto, I’ve had to face a fear…It was definitely a challenge. I’m so grateful for it, though. I’ve always wanted to be a pop star, so that was the perfect chance,” Fowler said. Head to WWD.com to read about Fowler’s experience modeling, including at the #VSFashionShow, and her relationship with Nick Jonas. #wwdeye (📷: @jilliansollazzo)
EXCLUSIVE: Huda Kattan just became the first beauty influencer to land a major beauty deal. Kattan's business, @hudabeauty, has received a minority investment from private equity firm TSG Consumer Partners. The brand, which industry sources say is on track to do $200 million in retail sales for 2017, will receive support on product, retail and geographic expansion through the deal. Get all the details on the deal and read @_a_collins' interview with Kattan on WWD.com. Link in bio. (📷: @jgreenery) #wwdbeauty #wwdnews
Peruvian model @juanaburga_official – who is known for walking the runways of @rodarte, @viviennewestwood and @torybuch – is making the move to the big screen with drama “Los Últimos.” The film premiered in Argentina in November and arrives in the U.S. and Europe in 2018. On making the switch from modeling to acting, Burga told WWD: “It’s a completely different thing – a lot of people think it’s similar or try to connect things, especially like getting used to the camera or being looked at all the time or playing these different characrers, but film is a completely different story.” #wwdeye (📷: @jgreenery)
London’s newly opened @designmuseum will look back on the life and work of Azzedine Alaïa in a show that the designer helped to curate before he died of heart failure last month. The retrospective, which Alaïa had worked on with Mark Wilson, chief curator of the @groningermuseum, will look at the impact of his work worldwide. The show, “Azzedine Alaïa: The Couturier,” will run from May 10 to October 7. Read more about the exhibit on WWD.com #wwdnews #wwdfashion (📷: @zefashioninsider)