Is Gap’s Turnaround Finally Working?

After two decades of failed comeback attempts, there is a growing consensus on Wall Street that Gap’s latest turnaround might just be the one that sticks.

On Tuesday, investment bank TD Cowen upgraded Gap Inc.’s stock from hold to buy, the fourth such ratings change by a retail analyst this year. Cowen’s Jonna Kim praised the company for “encouraging signs of brand transformation at Gap, more sustained growth at Old Navy and the prospect of Athleta returning to growth in [the second half of 2024] driven by the new management team.”

Under CEO Richard Dickson, the former Mattel executive who was appointed to the top role almost one year ago, the Gap brand’s entire visual identity has seen a gradual overhaul. Its assortment was scaled back to emphasise core styles. A website redesign has made the e-commerce experience less cluttered. And most importantly, products are being presented to shoppers — both online and in store — with an appealing mix of trendiness and accessibility. Dickson has credited Zac Posen, who joined Gap Inc. as creative director in February, for that last bit.

Customers are starting to notice. In the quarter ending May 4, all four of the company’s brands, which also includes Banana Republic, posted sales increases for the first time in years. The company’s stock has more than doubled since Dickson’s appointment in July 2023.

“With both Gap and Old Navy, you can tell the styling is so much better,” said Jessica Ramirez. “They’re showing how everyday people actually dress.”

Ramirez points to a product page for a pair of pleated shorts, in which the item is styled with a hoodie, a bucket hat and Adidas Sambas sneakers — Gen-Z’s current shoe of choice. “This really shows how an item can be worn, especially if I already have a hoodie and sneakers at home.”

A slew of buzzy collaborations and fashion-forward capsules have also helped propel the Gap brand into the cultural limelight in recent months, including a tie-up with the California brand Dôen in May. A spring linens collection promoted via a campaign with the musician Tyla was instrumental in driving sales growth this spring, according to Dickson in Gap’s latest earnings call. Last month, Gap Inc. signed on Omnicom Group as its media and marketing agency of record, which will play a major role in the company’s reinvigoration strategy, according to Dickson.

At Old Navy, a trendier assortment is getting traction on TikTok, where users have noted its spring summer line, which includes gingham dresses and linen matching sets, look a lot like Reformation — but at a fraction of the price.

Being on trend is about more than chasing clout. It also gives Gap and Old Navy the ability to rein in promotions, which have been a near constant at both brands for many years. The company has reported higher margins in recent quarters.

Even so, it’s too soon to call the turnaround a success. After so many years in the fashion wilderness, the bar is very low. While all four brands saw a sales lift last quarter, the growth was moderate: 3 percent at both Gap and Old Navy. Competition, whether from fast fashion or fellow mall retailers like the red hot Abercrombie & Fitch, is still fierce.

“Their growth doesn’t look amazing relative to some of their peers,” said Simeon Siegel, analyst at BMO Capital Markets.

Gap Inc. also has a history of short-lived breakthroughs. Banana Republic, for instance, saw a sudden spurt of sales growth after a major brand reinvention campaign, but could not sustain that momentum beyond three quarters.

“They’ll have one great capsule out of nowhere but it’s inconsistent,” Ramirez said.

But Dickson’s turnaround is already outperforming the last effort to resuscitate the Gap brand, the Yeezy collaboration in 2022 that baffled shoppers with massive heaps of black T-shirts and hoodies piled at the front of stores.

Unlike that last attempt, today’s streamlined assortment and confident marketing create a sense that Gap knows what it stands for again.

“You can tell they’re not trying to appeal to everyone anymore,” said retail consultant Gabriella Santaniello. “They’re comfortable.”




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Shein files for London IPO, Reuters reports. The China-founded company, which was valued at $66 billion in a fundraising round last year, started engaging with its financial and legal advisors earlier to explore a LSE listing this year. It is not immediately clear when Shein plans to launch the initial public offering.

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H&M sinks on doubts about margin target and June sale drop. Sales this month are likely to fall 6 percent in local currencies versus a year earlier, partly due to poor weather in many markets, the Swedish company said. In the second half of the year, H&M plans to boost sales by offering slightly higher discounts, said CEO Daniel Erver.

Amazon plans discount web store in effort to counter Temu and Shein. The company’s plans show Amazon shipping goods directly to customers from China. Amazon, which has sought to hold its ground with promises of speedy shipping, previously encouraged Chinese merchants to use logistics services that concentrate merchandise at US-based warehouses.

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Frasers buy THG’s Coggles website as they unveil partnership deal. For THG, the deal will give it access to a customer for its retail website technology, as well as providing an outlet for its products, including its Myprotein brand, in Sports Direct stores. Frasers will use THG for management of couriers and running its Australian delivery operations.


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Innovent’s obesity drug shows similar weight loss as Eli Lilly’s Zepbound. Innovent is seeking approval for mazdutide as a weight loss treatment in China. The drug’s sales in the country may reach $1.3 billion by 2030, according to Bloomberg Intelligence.

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Lanvin has named Peter Copping its new artistic director.
(Riccardo Olerhead)

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A model walks down a runway wearing a black dress
(Getty Images)

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Compiled by Yola Mzizi.

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