Gap might use Amazon to save its business

Gap Sales Slump Prompts Default Rating Cut to Junk

Gap Inc. has been struggling.

But CEO Art Peck may have a solution to fix the problems, and that's to use Amazon.

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"To not be considering Amazon and others would be — in my view — delusional," Peck said at Gap's shareholders meeting on Tuesday, according to Bloomberg. "We are always considering all of the opportunities beyond our traditional mix of channels and stores. Amazon is certainly one, and there are others as well."

It's no secret that Amazon is a huge threat to traditional mall-based retailers and department stores, and that threat is only getting more ominous.

According to a recent Morgan Stanley report, Amazon is the second-largest apparel retailer, with only Walmart ahead of it. It's posed to hold the biggest share of the apparel market by 2020, the report notes.

Morgan Stanley highlighted how retailers that utilize in-store experiences — like Victoria's Secret or Lululemon — might be safe from Amazon's swift ascent to prominence, as might luxury retailers.

Traditional retailers need to adapt, particularly as malls decline.

Since last year, Peck has pinpointed spring 2016 as the company's turnaround.

"The team has been focused obviously on spring of 2016 and I'm confident that they have been doing the right work to get the business back on track as we get into next year," Peck said on an August 2015 earnings call.

Now it's spring 2016, and things aren't looking great. Preliminary first quarter results revealed that Banana Republic's sales had plummet ted 11%, and Old Navy — once thought of the company's saving grace — saw comparable sales nosedive 6%.

Fortunately, things are looking better for the company's namesake brand. Gap's sales were down 3% in the first quarter, versus 10% this time last year. A recent walk through Gap showed that the company was slowly returning to its roots.

The company reports its full earnings for the first quarter of fiscal 2016 on Thursday.

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