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Gap Inc outlines business strategies for brands

17
Oct '08
Gap Inc presented investors with an update on the company's strategies for improving business at its core brands, along with an overview of growth initiatives across its online and international businesses.

“With Gap Inc's strong balance sheet, we're in a solid position to succeed in the long term and we have the flexibility to respond as necessary to the current economic environment,” said Glenn Murphy, Chairman and CEO of Gap Inc. “We remain focused on improving results at our core brands, while pursuing strategic growth opportunities online and internationally.”

Sabrina Simmons, the company's chief financial officer, said: “Our focus on disciplined inventory and cost management has enabled us to achieve a 65 percent growth in earnings per share in the first half of 2008. We're reaffirming our financial guidance for the year as we closely monitor the extreme market volatility.”

The company reiterated that it expects fiscal year 2008 diluted earnings per share on a GAAP basis to be $1.30 to $1.35. Gap Inc. also reiterated that it will deliver operating margins of about 10 percent and expects to generate about $1 billion in free cash flow for 2008. Gap Inc. releases its third quarter earnings on November 20, 2008.

In addition to Murphy and Simmons, speakers at today's annual investor meeting included the presidents of Gap, Banana Republic and Old Navy; and leaders of its online and franchise businesses. Highlights of these business updates follow:

Gap brand: Marka Hansen
For the past year, Gap brand has focused on stabilizing the business, strengthening its brand positioning globally, refining its target customer and delivering great product rooted in clean, classic American design. As a result of this work, Gap is in a solid position with a strong product line up for holiday and is now turning its attention to bringing customers back into stores.

Gap brand's marketing initiatives are shifting to a mix of traditional and non-traditional tactics, including influencer programs and multi-faceted campaigns. For instance, Gap brand is not planning TV during the remainder of the fiscal year, but is rolling out a broad “Vote for ____” campaign that aims to engage with 85 million voters this year. Gap brand's top priorities for 2009 are driving traffic, executing on its real estate strategy and improving productivity.

Old Navy: Tom Wyatt
Old Navy is making the necessary, critical changes to improve its business with a strategy centered on the concept of fun, family and value. Over the past seven months, Old Navy redefined its customer target and positioning as an energetic brand with great product at compelling prices for young moms shopping for their families and themselves.

The brand recently hired a new creative agency, Crispin Porter & Bogusky, to help align its marketing more closely with this target customer. Old Navy's top priorities for 2009 are improving the product assortments, driving traffic, delivering on its promise of value, and executing on its new store design.


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