Gap Reports Strong Sales on Increased Marketing Spending

Retailer Reports Best Holiday Season in Six Years

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Gap's comeback continues.

Gap Inc. reported its best holiday shopping season in six years as the retailer's turnaround efforts take hold.

Annual measured-media spending for the company rose 13% from $302 million to $340 million, according to Kantar Media. Spending for the Gap brand in North America more than doubled from $21.5 million in 2011 to $54.5 million in 2012.

"The marketing investment was mostly in Gap brand and it was mostly made domestically," said CEO Glenn Murphy during a conference call with analysts. "That was all about getting the brand back to relevance, getting people to see the incredible equity that is iconic American casual business. The 'Bright' campaign was launched 12 months ago. It has been a very good platform for the business."

Mr. Murphy is working to maintain the turnaround at Gap's namesake, Old Navy and Banana Republic brands in North America. Improved merchandise and marketing, led by new hires like Gap CMO Seth Farbman, resulted in a 5% gain in annual same-store sales, reversing a 4% decline a year earlier.

Seth Farbman, Gap Global CMO
Seth Farbman, Gap Global CMO

Gap brand saw same-store sales rise 4% in the fourth quarter - no small feat for a brand that had recorded just one December of positive same-store sales in North America since 2004. Under Mr. Farbman's leadership the global marketing platform "Be Bright" has been introduced and marketing has both pushed forward (with new social media efforts like Styld.by) and looked back (emphasizing its founders and its history through in-store marketing.)

"There have been a lot of structural changes and new hires, which we view positively, and the product remains consistently strong at all brands," said Randal Konik, an analyst at Jefferies Group in New York.

Earlier this month, Old Navy tapped Ivan Wicksteed to lead the Old Navy brand, which had been without a chief marketer since the summer of 2011. Mr. Wicksteed has logged time on the client side at Cole Haan, Coca-Cola and Converse, as well as the agency side at TBWA/Chiat/Day, Los Angeles, and Ammirati Puris Lintas, London.

Fourth-quarter sales for the company rose 11% to $4.73 billion, the highest since the quarter ended in February 2007, while revenue for the year increased 8% to $15.7 billion. Earnings for the quarter ended Feb. 2 rose 61% to $351 million, while full-year earnings rose 3% to $1.1 billion.

--Contributions from Bloomberg News

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