Reporting Continued Dip in Sales, Gap Plans to Ramp Up Marketing

Old Navy Showing Signs of Turnaround While Gap and Banana Republic Still Lag

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Amy Schumer draws laughs for Old Navy.
Amy Schumer draws laughs for Old Navy. Credit: Old Navy

Gap wants to get its voice back, and it's hoping investments in marketing and apparel technology will help make it happen. The San Francisco-based retail chain reported second-quarter earnings results on Thursday, citing improvement in its Old Navy brand, though Gap and Banana Republic still lag.

For the quarter ended July 30, same-store sales were down 2% for Gap Inc., which included a 9% drop at Banana Republic, 3% decline at Gap, and flat sales at Old Navy. Net sales for the period declined 1% to $3.85 billion.

The 47-year-old retailer is planning to ramp up its marketing. Though Gap Inc.'s marketing spend was flat in the second quarter, the company plans to invest more dollars into advertising in the third quarter, executives said. In 2015, Gap Inc. spent $164 million on measured media in the U.S., a 26.4% decline over 2014, according to Ad Age's Datacenter.

"Next really is to bring the voice of the brand back and start selling the story because we have increased marketing a little bit," said Art Peck, chief executive of the 3,730-unit chain, on a conference call. He noted that marketing has paid off for Old Navy recently but that the company has been quieter with its namesake and Banana Republic brands. Earlier this year, Gap brand hired Craig Brommers, formerly with Abercrombie &Fitch, as its new chief marketing officer. He started in the role in late July.

Gap Inc. is also focused on improving its supply chain in order to better react to consumer demand. Mr. Peck said that the Gap label recently had success in selling out of trendy tops featuring embellishments such as eyelet lace, and was able to work with vendors to reorder the items in time for August and September, for example.

The company is also working to bring technical apparel innovations, such as heat-managing and stain-resistant fabrics, into its assortment, particularly in menswear. Already, stretch denim at Old Navy has been well-received by shoppers, according to Mr. Peck.

Though the back-to-school selling season is well underway—the school year has already begun in California, for example—Gap executives said it's too early to report on any August sales results. Earlier this month, Old Navy, which has been without a CMO since March, began airing a new campaign featuring Amy Schumer. The popular comedian has signed on for several spots that will air through the holiday season.

One analyst recently called out the lower-priced brand's advertising.

"The new marketing efforts at Old Navy are likely driving incremental traffic," wrote Richard Jaffe, a retail analyst at Stifel Nicolaus, in a recent research report.

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