Gap Completes an Ugly Year

Gap Inc. (San Francisco) reported a 35 percent drop in net earnings for its fourth quarter ending Feb. 3, 2007.

Earnings for its full fiscal year, also ended February 3, dropped 25 percent.

“We were not satisfied with our 2006 results and are taking action,” said interim president and ceo Robert Fisher. “In 2007, we are focusing on three priorities: fixing our core business by creating the right product and outstanding store experiences; retaining and developing the best talent in the industry; and examining our organizational structure to ensure that we enable our brands to make decisions and effect change more efficiently. I am confident that we are taking the necessary actions to revitalize our brands.”

Management changes have dotted the Gap landscape in the past two months, starting with the resignation of president and ceo Paul Pressler in January. Since then, Fisher (son of company founder Donald Fisher) stepped in as an interim replacement; Marka Hansen, formerly president of the Banana Republic division, became president of the Gap brand; and, most recently, Michael Cape, formerly of J.C. Penney (Plano, Texas), was named executive vp, marketing, for the Old Navy division.

Also, the company made the decisions to abort the Forth & Towne concept and to convert its 45 Old Navy Outlet stores into standalone Old Navy stores. The company expects this conversion to be completed by October 2007.

In the fourth quarter, net sales rose 2 percent but same-store sales decreased 7 percent. For the full year, net sales were about flat and same-store sales were down 7 percent.

By division, Gap North America’s same-store sales were down 8 percent in the quarter; Banana Republic North America’s same-store sales were up 3 percent; Old Navy North America’s same-store sales were down 9 percent; and international same-store sales were down 6 percent.

For the full year, Gap North America’s same-store sales were down 7 percent; Banana Republic North America’s same-store sales were flat; Old Navy North America’s same-store sales were down 8 percent; and international same-store sales were down 8 percent.