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Gap Inc. Alters Market Strategies

Gap Inc. executives unveiled a shift in marketing strategies for its portfolio of brands, while affirming its earnings outlook for the remainder of the year.

LOS ANGELES — In a Thursday meeting with investors, Gap Inc. executives unveiled a shift in marketing strategies for its portfolio of brands, while affirming its earnings outlook for the remainder of the year.

The Gap, which has long featured holiday television ads, often featuring celebrity spokesmodels like Sarah Jessica Parker, has axed its TV campaign for the upcoming season. Instead, Gap North America president Marka Hanson said the brand will shift to “a mix of traditional and non-traditional” marketing strategies, including a soon-to-be-released campaign aimed at voters in this election cycle. Hanson said the Gap brand’s major initiative next year will be to drive store traffic.

Gap’s strategy shift comes a few weeks after Old Navy switched advertising agencies for its campaign, on which it spent an estimated $207 million for last year, according to TNS Media Intelligence. The long-struggling purveyor of basic apparel dropped Chandelier Creative for Crispin Porter & Bogusky, which counts Burger King, Volkswagen and Bell Sports among its clients. The agency’s first ads for Old Navy will debut in March and will target young, budget-conscious female consumers, executives said.

Also during the meeting, executives reaffirmed Gap’s earnings guidance for the fiscal year, at $1.30 to $1.35. “Our focus on disciplined inventory and cost management has enabled us to achieve a 65 percent growth in earnings per share in the first half of 2008,” Gap Inc. CFO Sabrina Simmons said. “We’re reaffirming our financial guidance for the year as we closely monitor the extreme market volatility.”

Gap chairman and CEO Glenn Murphy hinted at additional international expansion and perhaps future strategic acquisitions, following the company’s $150 million purchase of women’s active wear label Athleta in September. “With Gap Inc.’s strong balance sheet, we’re in a solid position to succeed in the long term and we have the flexibility to respond as necessary to the current economic environment,” Murphy said. “We remain focused on improving results at our core brands, while pursuing strategic growth opportunities online and internationally.”

At Banana Republic, president Jack Calhoun outlined a marketing strategy targeted at the affluent, professional demographic. Banana Republic recently opened its first store in the U.K.

Gap Inc. Direct, the company’s online retail business, is expected to reach $1 billion in sales by year’s end. Last year, Gap Inc’s online retail portfolio generated $903 million in sales, a 66 percent increase over 2005 sales of $595 million.

Gap will report its third-quarter earnings on Nov. 20.