33% Higher Marketing Spend at GPS in Q4 ‘09 Yields Worse 3-Year Comp Sales Run Rate than Peers
Let’s be clear, Mr. Murphy has done a fabulous job at The Gap (GPS – $21.63).
But, let’s not get too excited about the sudden comp store sales turnaround at Old Navy since the chain has been lapping last year’s strategic merchandising flop and has benefited from a higher marketing spend.
In addition, we see little hope for the core chain after the dismal re-launch of denim and the fact that we believe Old Navy is currently cannibalizing its sales. All the incremental marketing spend did in Q4 2009 for The Gap was to stop the bleeding.
The core chain will continue to lose market share as its bloated store size (well suited for the 1980’s/1990’s) and “one size fits all” strategy is consistently outflanked by its more nimble specialty apparel peers.
It’s probably fair to say that GPS entered FY 2007 with a low bar based upon the fact that the company was one of the few retailers that reported negative comp store sales in FY 2005/2006.
Yet, despite the low bar coming into FY 2007 and incremental +33% marketing spend in Q4 2009, the company’s current 3-year comp store sales run rates leaves a lot to be desired relative to its peers.
Mr. Murphy mentioned on yesterday’s conference call that The Gap’s turnaround is likely to be a longer “journey” than he originally envisioned. This journey is turning into a nightmare for him and we see nothing over the horizon that will stem the tide at the core chain.
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on Friday, February 26th, 2010 at 11:05 am and is filed under Commentary.
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33% Higher Marketing Spend at GPS in Q4 ‘09 Yields Worse 3-Year Comp Sales Run Rate than Peers
Let’s be clear, Mr. Murphy has done a fabulous job at The Gap (GPS – $21.63).
But, let’s not get too excited about the sudden comp store sales turnaround at Old Navy since the chain has been lapping last year’s strategic merchandising flop and has benefited from a higher marketing spend.
In addition, we see little hope for the core chain after the dismal re-launch of denim and the fact that we believe Old Navy is currently cannibalizing its sales. All the incremental marketing spend did in Q4 2009 for The Gap was to stop the bleeding.
The core chain will continue to lose market share as its bloated store size (well suited for the 1980’s/1990’s) and “one size fits all” strategy is consistently outflanked by its more nimble specialty apparel peers.
It’s probably fair to say that GPS entered FY 2007 with a low bar based upon the fact that the company was one of the few retailers that reported negative comp store sales in FY 2005/2006.
Yet, despite the low bar coming into FY 2007 and incremental +33% marketing spend in Q4 2009, the company’s current 3-year comp store sales run rates leaves a lot to be desired relative to its peers.
Mr. Murphy mentioned on yesterday’s conference call that The Gap’s turnaround is likely to be a longer “journey” than he originally envisioned. This journey is turning into a nightmare for him and we see nothing over the horizon that will stem the tide at the core chain.
3-Year Comp Store Sales Run Rates
This entry was posted on Friday, February 26th, 2010 at 11:05 am and is filed under Commentary. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.