Mobile Payments, Digital Presence Help The Gap Beat Estimates

November 26, 2024         By: Steven Anderson

In a retail environment increasingly populated by tales of calamity, woe, and store closings, hearing that a physical, brick-and-mortar retailer managed to actually beat estimates is something akin to a minor miracle. Finding out that that particular minor miracle was targeted at The Gap is even more amazing. Yet that’s just what happened, and The Gap’s estimate-beating performance is thanks to one key factor: digital presence.

Word from The Gap president and CEO Art Peck noted that The Gap has had “millions” of visitors to its ecommerce platform. This has allowed it to more effectively roll out its new Hill City brand, which was backed by a team of less than 20 and took under a year to bring to life. That, also, is a minor miracle. The Athleta brand, another Gap product, is considered a “growth engine” for the firm, and “did not disappoint” in back to school operations.

However, the news wasn’t all rosy. Comparable sales were down seven percent this year, as compared to an increase of one percent last year. That compares poorly to others in the field, like Banana Republic and its two percent growth, or Old Navy and its four percent. Peck noted that this was a call to “do better” going forward.

In a more unusual development, it turns out that physical stores aren’t particularly helping, nor hurting, the brand. The company’s online business is actually growing steadily, to the point where it now accounts for about a fifth of the brand’s total revenue. Yet its outlet business—about 500 stores worldwide—is pulling in 30 percent of the revenue by itself.

Now with the holiday shopping season in full swing, The Gap must take this opportunity to make its presence known in the field. Sadly, there is no easy answer here, as the company is sufficiently well-diversified that cutting anything would result in cutting actual percentages off the bottom line as well. There may be room to ditch some stores—that real estate is hanging heavily on the company—but with physical stores making up about 80 percent of revenue, any cuts here could be disastrous.

Still, The Gap is ultimately in a decent position, and though there’s room for improvement, it’s proving the viability of the brick-and-mortar alongside the necessity of the digital.