Reporter | Chen Qirui
Edit | Lou Shuqin
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On January 26, New York time, S&P Dow Jones Index Company announced that Gap Group, the parent company of American apparel brand Gap, will withdraw from the S&P 500 index and will enter the S&P Mid-Cap 400 Index for statistics in the future.
The S&P 500 is an important measure of the rise and fall of the U.S. stock market and economy, consisting of 500 large companies listed on the New York Stock Exchange and NASDAQ, and has a history of more than 50 years. The S&P Mid-Cap 400, on the other hand, looks at 400 companies that issue mid-cap stocks in the United States.
This means that Gap Group's position in the market has declined, and the lack of revenue growth in recent years is the main reason. But for most investors, this adjustment actually found the right positioning for Gap Group. The day after the news, Gap's share price rose 2.9% to $18.07 per share.
Although Gap remains one of the largest apparel retailers in the United States today, its golden age is over.
In the third quarter of 2021, Gap's revenue fell 10% from 2019 and has not fully recovered to pre-pandemic levels. Banana Republic's performance was even more worrying, with sales down 18 percent. Old Navy has also begun to slow down now, with sales growth of only 8% in the quarter compared to pre-pandemic levels.
Only athletic brand Athleta continued to record strong growth, with revenue up 48% in the third quarter compared to pre-pandemic levels. But as a brand acquired by Gap Group in 2008, Athleta still can't match Gap and Old Navy in terms of scale, and it wasn't until September 2021 that it opened its first store outside of North America.
Zara and Uniqlo, as competitors, have gradually recovered to the level of 2019 after the epidemic situation gradually stabilized in the second half of 2020. According to the third quarter results of 2021 released by Zara's parent company, Inditex Group, operating income for the first nine months ended October 31 was 19.325 billion euros, an increase of 21% and 10% over 2020 and 2019.
Among the large retailers of fast fashion, only H&M Group is in a similar situation to Thatp Group. For the fourth quarter ended 30 November, H&M Group generated sales of SEK 56,813 million, down from SEK 61,704 million for the same period in 2019. But the peculiarity of Gap Group is that it relies more on the U.S. market than other large fast fashion companies.
Interface Fashion has reported that Gap became famous in the late hippie era with its classic American style, and the combination of simple white shirts and jeans profoundly influenced the fashion industry. But after entering 2000, consumers were tired of Gap's style. Frequent changes in top management and unsustainable transformation strategies not only waste time, but also further widen the gap between Gap and consumers.
Because Gap's American style is too distinct, it is inevitable that when it expands in the global market, it will inevitably encounter water and soil. After a series of business setbacks, Gap and its sister brands have shrunk the Asian and European markets in recent years. Old Navy has pulled out of China, and Gap has handed over its italian stores to a third party.
Judging from the performance of the entire fashion industry after the outbreak of the epidemic, the recovery of the US market is relatively lagging behind, and if it is overly dependent, it will have a great impact on the operation of the brand. According to the earnings report, as of the third quarter of 2021, Gap still has nearly 190 stores closed in North America.
In response, Gap Group is increasing its online business, and the current e-commerce sales account for 38% of total performance. In terms of image, Gap and singer Kanye West signed a ten-year long-term contract to collaborate on the Yeezy Gap series, and the most recent move is to launch a three-way joint series with Balenciaga.
The joint brand with Balenciaga is expected to go on sale in June 2022. Prior to that, Yeezy Gap had brought a lot of exposure to Gap and Gap Group, and one of the co-branded sweatshirts became the highest single-day online sales since Gap's inception.