GAP’s performance has plummeted for five consecutive quarters, and its rating was lowered to junk status by S&P
Not surprisingly, GAP’s performance is still a mess. GAP’s latest first-quarter financial report showed that revenue was US$3.438 billion, a year-on-year decrease of 6%, compared with US$3.66 billion in the same period last year, and net profit was US$127 million, a 47% drop. Five consecutive quarters of declining performance have prompted GAP to once again adopt the strategy of closing stores to stop losses. GAP announced that it will close 53 Old Navy stores and 22 Banana Republic stores in Japan. The store closures are expected to save GAP $275 million in pre-tax expenses.
With successive losses, GAP’s stagnant performance has caused the group’s rating to be repeatedly downgraded. Standard & Poor lowered GAP Group’s credit rating to “junk” level. GAP has a total of 3,700 stores around the world and owns five major brands: GAP, Banana Republic, Old Navy, Piperlime and Athleta. GAP stated that the store closures are expected to save the group US$275 million in pre-tax expenses and provide room for improvement of 200 basis points in the group’s operating profit margin.
GAP Group believes that the Old Navy brand will temporarily focus on North America, Mexico and China, the core of the group headquarters, and also includes international franchise business. Despite the large number of store closures in the Japanese market, Japan is still an important market. GAP Group has approximately 200 GAP and Banana Republic stores in Japan. However, store closures will also bring an annual sales loss of US$250 million to the group. This fiscal year, the above-mentioned store closures will cause one-time expenses of US$300 million, of which US$100 million is a non-cash loss. GAP’s performance has plummeted for five consecutive quarters, and its rating was lowered to junk status by S&P
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