"We see a lot of unsatisfied demand," said Gap CFO Heidi Kunz in her presentation at the
Banc of America Securities Investment Conference
here. She referred to a chart showing that Gap's three big brands Gap,
together grab only 6% of the U.S. apparel market. Horrors! Abroad, the straits are even more dire: Gap has less than 1% of the international markets it's in.
That's a lot of butts to cover!
To get that job done, Gap plans to increase the ubiquity of stores in its major markets, push into secondary markets, expand internationally and keep coming up with new concepts like Old Navy, which, despite recent problems, is still the company's growth engine.
Kunz said Gap's new store format (slowly being rolled out across its existing store base) is going to be a "very, very significant improvement" on the current, decade-old format. Dressing rooms will have call buttons; stacks of jeans and T-shirts will be neatly folded into size-sorted cubbies, and walls will be covered with marketing messages.
Oh, and Gap will lower prices on key items and also stress value at Banana Republic and Old Navy, too. Depending on the scope of price reductions -- whether it's just on a few key items or across a broader swath of merchandise -- that could pressure Gap's profit margins as well as force its competitors to lower prices, too.
Didn't get enough of those stop-action Gap TV ads? You're not alone; Kunz blamed the switch from commercials to in-store promotions for the company's
difficult summer. Gap TV ads will be back for the holidays, though oddly enough, Banana Republic's experiment with TV promotions won't continue. Old Navy TV ads will be "funnier." (May we suggest a celebrity death match between Lisa Ling and Morgan Fairchild?)
But it all comes down to the clothes. Kunz said she thinks the company is getting fashion right this season, though in the August sales release she said the third and fourth quarters will still be challenging. Investors are still frustrated by Gap, whose shares at $23.38 are still trading at less than half their 52-week high of $53.75. And with the retail environment cutthroat and analysts predicting a lackluster holiday sales season, Kunz and her khaki-clad army have their work cut out for them.