Gap’s brand revitalization efforts are paying off

The news: Gap Inc.’s turnaround is gaining momentum under the leadership of CEO Richard Dickson and creative director Zac Posen. The retailer’s focus on delivering on-trend styles and improving brand storytelling helped it smash earnings and revenue expectations in Q1.

• All four brands—Gap, Old Navy, Banana Republic, and Athleta—reported comparable sales growth in Q1, a first for the company, enabling it to grow market share for the fifth-straight quarter.
• Revenues rose 3% to $3.39 billion, beating LSEG’s consensus estimate for $3.29 billion.
• Earnings per share rose to 41 cents, up from 5 cents in the year-ago quarter and outpacing estimates for 14 cents.

A winning strategy: Gap’s newfound ability to put its finger on the pulse of consumer trends is enabling it to capture shopper interest at a time when other retailers are struggling to revive discretionary sales.

• The company managed to insert itself firmly into the cultural conversation with a combination of savvy brand and celebrity partnerships, alongside product assortments that resonate strongly with consumers—like Gap’s Linen Shop and Banana Republic’s Classics line.
• Having a designer of Posen’s caliber at the helm is also helping to boost the brand’s profile. The company generated major buzz after Da’Vine Joy Randolph wore one of his creations to the Met Gala, while a version of a dress designed for Anne Hathaway sold out hours after debuting on Gap’s site.

The big picture: Gap, like Abercrombie & Fitch and American Eagle, is finding that the key to success lies in selling what people want, as well as using its marketing budget to generate excitement and awareness of its offerings.

• The success of that strategy is fueling the retailer’s optimism for the year ahead: It now expects net sales to be up slightly in FY2024, an increase from its prior forecast for flat sales.