2005-11-19

Money & Stats: Gap Out of Fashion

The US American fashion chain 'Gap' is losing out to imitation rivals, prompting a 10 per cent sales slump in British sales, the firm admitted 2005-11-18. The retailer, which has more than 125 stores in the UK and has been endorsed by celebrities including 'Madonna', 'Missy Elliot' and Ms.Sarah Jessica Parker, said its autumn ranges had failed to appeal to consumers... It said international stores were the worst-performing part of its business, suggesting British shoppers had abandoned 'Gap' in favour of cheaper or more fashionable competitors such as 'Top Shop', 'H&M', 'Zara' and 'Mango'. Sales of the autumn collection have fallen by 10 per cent outside the USA between 2005-08 and 2005-10, despite an advertising campaign featuring the singer Ms.Joss Stone to boost its credibility as a fashion label. Branches in North America experienced a less severe sales drop of 4 per cent. The UK high street market is increasingly sophisticated thanks to 'fast fashion' -- affordable versions of catwalk couture which are on the racks within months of first appearing in magazines. Mr.Chris Curtis, the news editor of 'Draper's Magazine', the fashion industry's 'bible', said:
'European high street customers are more fashion forward and less conservative than [North] American buyers and have higher expectations. '"Gap" needs to decide why people are coming into their stores. 'Is it because of the superior quality, low price or fashion sense? 'Price is certainly an issue for stores like "French Connection", "Next" and "Gap". 'A shirt that cost 40_USD in [North] America costs 40_GBP over here, so they may be more affordable [in The USA]. '"Gap" has set up a design studio in London to cater to the tastes of the UK market, which is a step in the right direction, although the effects probably won't be seen until the autumn '06 collection. '"Gap International" is probably not set up for the fast turnaround expected by demanding British consumers.' '"Gap" is not incapable of appealing to the UK market. 'Fashion goes in cycles and their next collection might be really good.'
San Francisco-based 'Gap' has also blamed its poor performance on increased promotions and sales to shift leftover stock. Mr.Paul Pressler, the chief executive and president, described the results as 'unacceptable' and warned that it would miss targets for earnings and cash flow. Mr.Pressler said:
'The issues we face are "fixable" and we are aggressively executing plans to provide more compelling product and exceptional store experiences for our customers.'
Along with other middle-market shops such as 'French Connection' and 'Next', 'Gap' is struggling to keep up with the likes of 'Primark', 'New Look' and 'TK Maxx'. The growth of sales in supermarket clothing demonstrates shoppers' 'eye for a bargain' and trend watchers claim people are ignoring middle-market shops in favour of mixing bargain pieces with designer purchases. 'French Connection', which slashed its full-year profit forecast in 2005-07, blaming a weak retail environment, has also failed to capture the imagination of British customers. The 'FCUK' campaign, which has run since 1997, is finally being ditched in favour of more subtle branding after it was criticised as being dated. Earlier this year, Mr.Stephen Wolfson, 'Next's' chief executive, reported the worst trading figures for seven years and admitted the company was struggling to get stock onto the shelves quickly enough. Stock rotation is now being halved to six weeks, but brands like 'Zara' bring new lines onto their shelves every two to three weeks. In contrast, shoppers' paradise 'H&M' has wowed fashionistas with its new collection designed by Ms.Stella Mccartney, which was launched a week ago. Staff at 'H&M' on Princes Street, Edinburgh, and in Glasgow's Buchanan Galleries reported that certain stock sold out within hours of opening. Prices in the range start at 24.99_GBP. Mr.Nick Bubb, a retail analyst at 'Evolution Beeson Gregory', said:
'I think "Gap's" major problem is one of price positioning.
'To maintain their value they need to make the first price the right price and not just slash prices in 25 per cent sales.
'The figures released are "pretty grisly".' '"Next's" stock is pretty dull and "French Connection" has delusions of grandeur that it is on a par with brands like "Diesel", when in fact it is closer to "Top Shop".'
Mr.Stephen Sunnucks, the former 'New Look' boss, was made president of 'Gap Europe' in 2005-04 in a move designed to show 're-inforced commitment' to the European market. France is 'Gap's' only other market in Europe and there are around 34 stores across the Channel, while the overseas portfolio also includes shops in Japan. The first 'Gap' shop outside the USA was founded in London in 1987 and now outlets stretch from Brighton to Inverness. The first Scottish 'Gap' came to Edinburgh in 1995. 'Gap' cannot afford to be complacent, as one of its main competitors in the USA, 'Abercrombie & Fitch', plans to expand into the European market with 20 stores, including one in London, to be opened by 2007. 'A&F' also trades heavily on the all-American image, but at lower prices and with a younger, edgier customer base. Its third quarter results were hailed a success, with net sale increases of 35 per cent in the USA. ' 'Why fashion giant Gap has suddenly gone out of style, Laura Roberts, The Scotsman, 2005-11-19, Sa

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