* Reaffirms FY EPS view $1.40-$1.50/shr
* Eyes more color in its fashion, cleaner presentation
* Shares flat
By Phil Wahba
NEW YORK, Oct 13 Gap Inc is looking to
simplify its clothing offerings, dab in more color, and
de-clutter its North American namesake stores to help boost
sluggish sales at the chain.
The Gap stores, which make up nearly a quarter of overall
sales but has been languishing for years, strayed from what it
was best known for -- high-quality jeans and casual clothes
with an American aesthetic, the president of Gap North America,
Art Peck, told Reuters in an exclusive interview.
"What's expected of us is pretty clear," Peck said on
Wednesday, the eve of the retailer's investor day. "I think
it's been us who've kind of wandered around."
Peck, 56, oversees the Gap stores in North America, but not
the company's Old Navy and Banana Republic chains. He took up
his job in February after a management shakeup.
Industry experts and analysts say that Gap has confused
shoppers, who are not sure what to turn to Gap for anymore.
Peck intends to remedy that. Although he's only been on the
job for a few months, Gap's shelves have begun to reflect his
back-to-basics-with-a-twist approach and sparer presentation,
which will become even more noticeable during the upcoming
At the investor day, Gap reaffirmed its forecast for
earnings per share of between $1.40 and $1.50 this fiscal year,
in line with Wall Street expectations. It also said it expects
profit margins to improve in the second half of 2012 as
pressure from higher cotton costs eases.
Continuing its expansion outside North America, where Gap
Inc only gets 14 percent of sales now, the company said it
plans to triple the number of Gap stores in greater China to 45
by the end of 2012. It also launching its first overseas Old
Navy store, in Japan, in the next 18 months.
Gap shares were flat at $17.95 in afternoon trading
Gap has added more vivid colors to its denim jeans and
introduced skinny jean leggings with animal and snake prints as
well as colored corduroy leggings, which have sold well.
As Peck walked Gap's showroom on Thursday, he pointed to
coral colored women's khakis and a v-neck hoodie as examples of
the brands effort to stick with its classics but add a new
touch without alienating shoppers. For instance, Gap attempts
at more formal, sober clothes for women fell flat, Peck said.
The Body Fit line of yoga and casual clothing for women,
introduced last year in a direct challenge to Lululemon
Athletica is also being well received.
But Peck isn't crazy about how Gap displays clothes on the
sales floor. So a big change has been to stack fewer items on
top of one another to reduce the clutter that makes shelves
look like discount bins and use more elegant shelving.
"We have far better product in our stores than we're
getting paid for," Peck said.
Gap currently operates about 890 namesake stores in North
America, not including its outlet locations, and at the
investor meeting, it reiterated its intention to lower that to
700 by the end of 2013 to help same-store sales.
Gap's sister brands are also tweaking their offerings.
Banana Republic's holiday collection, on display at the
investor meeting, reflected how that brand is re-emphasizing
its womenswear for the workplace and special occasions, after
finding its trendier lines were met with a tepid reception last
Old Navy, a lower priced chain and Gap Inc's biggest brand
by sales, is adding more activewear like yoga clothes.
Gap has lost sales in recent years to specialty retailers
like Abercrombie & Fitch and could face intense
competition at home from rival Uniqlo, owned by Japan's Fast
Retailing , which is eyeing about 200 U.S. stores by
2020, up from three.
Sales at Gap's North American stores open at least a year
fell by at least 5 percent in six of the last seven years and
have kept dropping this year, a far cry from the chain's heyday
in the 1980s and 1990s as the go-to retailer for casual
Even as it tries to wean shoppers off of looking for deals,
Gap will continue to discount this holiday season, but Peck
said the focus needs to shift away from price.
"We need to start talking about the merits of the product
versus the merits of the deal," he said.
Peck said Gap must lure a younger generation of shoppers,
which means not just selling the same old clothes.
"Predictability ultimately means you fade into the
background," he said.