Gap is making a comeback.
The model reported 5% same-store sales growth for its fiscal first quarter of 2025. Its the sixth consecutive quarter of same-store gross sales development.
Hole was one of the crucial common retail names of the Nineteen Eighties and Nineties, however fell out of favor amongst shoppers at the beginning of the brand new millennium. From fiscal 2001 to 2021, the model closed about 2,000 shops and annual gross sales fell by about $3.5 billion.
Regardless of a number of turnaround attempts from a revolving door of CEOs, the corporate could not maintain momentum.
“They might have a pair quarters the place issues appeared like they have been doing properly. They might over purchase the stock, then they’d advertise. Then selling kills the model fairness,” mentioned Barclays senior retail analyst Adrienne Yih. “The manufacturers weren’t sturdy sufficient to drive full value promoting, so that they have been at all times on promo.”
In 2023, CEO Richard Dickson took the helm of Hole, which owns its namesake banner, Previous Navy, Banana Republic and Athleta. Dickson got here from toymaker Mattel the place he’s largely credited for the revival of the Barbie model. One in all Dickson’s first strikes on the attire retailer was hiring clothier Zac Posen as the corporate’s inventive director.
Posen has helped to place Hole again into the cultural dialog by dressing celebrities like Demi Moore, Timothée Chalamet, Anne Hathaway and Laura Harrier for splashy crimson carpet occasions. Nevertheless, Posen’s important focus is on the Previous Navy model the place he serves as chief inventive officer.
Re-energizing Previous Navy is essential as a result of it accounts for greater than half of Hole’s income. In fiscal 2024, Gap grew overall sales by 1%, pushed largely by development at Previous Navy. Whereas that will appear nominal, its underlying enterprise is extra worthwhile.
“They’re rising that 1% on the very best gross margins that they’ve had up to now 20 years. Whenever you lastly do develop gross sales, you wish to develop it in a very excessive revenue producing and wholesome method,” mentioned Yih.
With the intention to get again to development, Hole needed to shrink first. The corporate closed lots of of shops over the previous decade and laid off thousands of employees in 2023 because it labored to wash up its steadiness sheet.
“We had unprofitable shops, unprofitable markets, the place we did retailer closures. We moved worldwide companies to companions, joint ventures,” mentioned Hole model president and CEO Mark Breitbard. “We consolidated our SKUs, we rationalized types, improved high quality dramatically. So all of these issues, together with some issues like decreasing prices, that are key to creating a enterprise wholesome however not enjoyable. These have been establishing a basis for us to layer on a inventive renaissance, actually, for the model.”
Nonetheless, there’s extra work to be carried out. Banana Republic and Athleta usually are not seeing the identical consistency in same-store gross sales development as Hole and Previous Navy. Whereas smaller manufacturers, collectively they accounted for greater than 20% of company-wide web gross sales in fiscal 2024.
Plus, uncertainty surrounding U.S. tariff insurance policies has created a difficult retail panorama. Regardless of beating Wall Road’s earnings expectations for its fiscal first-quarter report, Hole noticed its inventory fall 15% on information that tariffs, if they continue to be in place as is, would value the corporate between $100 million and $150 million.
Watch the video to find out if the Gap renaissance is here to stay.