'The question is ... what's NOT on sale?': Gap's email to customers reveals it has no plans to scale back on one of its biggest problems

  • Discounts have become a mainstay at Gap, and it's increasingly becoming unusual to pay full price for anything there. 
  • In Gap Inc.'s most recent earnings statement, it reported that same-store sales for its namesake brand were down 7%, while its sister brands Old Navy and Banana Republic reported a 4% and 2% increase, respectively.
  • Group CEO Art Peck said during earnings that the company was disappointed with the results and admitted, "We need to do better." Peck said that Gap continued to feel the impact of "operational missteps in the business," which led to heavy discounting. 

Gap is embracing discounting as it heads into 2019. 

On Thursday, the retailer sent an email to customers informing them about its end-of-year sale, which offers up to 75% off sale items, plus an extra 40% off the markdown price with the code SALE. Shoppers could end up spending as little as $18 on an $80 sweater, for example.

The subject line of the email read: "The question is...what's NOT on sale," which is a stark reminder that discounts have become a mainstay at the brand. It's increasingly becoming unusual to pay full price for anything there. 

In Gap Inc.'s most recent earnings statement, it reported that same-store sales for its namesake brand were down 7%, while its sister brands Old Navy and Banana Republic reported a 4% and 2% increase, respectively.

In a call with investors after earnings were released, group CEO Art Peck said that the company was disappointed with the results and admitted, "We need to do better."

Peck said that Gap continued to feel the impact of "operational missteps in the business," which were highlighted last year. These operational problems delayed the timing of new items, which meant that Gap had to turn to heavy discounting to clear unwanted clothing from stores.

In May,Gap CFO Teri List-Stoll said management had made some "strategic decisions to aggressively clear inventory through sell-off."

Peck added at the time: "My experience now has been, and this is universal, is if you have too much inventory or the wrong inventory, holding onto it does not make it better."

But inventory clearing and constant discounting show no sign of slowing down as we enter 2019. Gap did not immediately respond to Business Insider's request for comment on discounting. 

Peck is now focused on trimming the Gap store fleet to focus on the most productive locations. 

"This is the piece of the business that we are firmly committed to addressing with urgency," he said in November

He continued: "We have had a lot of stores that are in the bottom half of the fleet that have continued to deteriorate over time. And it is my strong belief that we've kicked the can down the road on this and offered a deteriorating customer experience ... These stores are a drag on the health and a drag on the performance of the brand."

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