Although since everything from fuel prices to grocery expenditures have soared, Levi CEO Chip Bergh told that the retailer has still to see shoppers shop down for inexpensive clothing. Moreover, despite the fact that the company has raised prices on some products to balance other business costs, customer demand stayed high, he noted.

Being precise, Bergh said Levi is keeping a tight eye on market demands, knowing that economists’ predictions of a coming recession have been escalating. “We don’t have our head in the sand. If we see demand starting to get wobbly, we will take the appropriate action,” the CEO said.

Levi shares surged about 1.5 percent in extended trade after falling 1.5 percent earlier in the day. Levi reported net income of $196 million, or 48 cents per share, up from $143 million, or 35 cents per share, the previous year. Excluding one-time factors, it earned 46 cents per share, which was more than the 42 cents expected by analysts. Revenue increased 22% year on year to $1.59 billion from $1.31 billion. This surpassed forecasts of $1.55 billion.

Levi stated it lost $60 million in sales owing to supply chain problems during the most recent quarter. Its worldwide direct-to-consumer sales increased by 35% year on year, while wholesale revenue increased by 15%. While Levi already sells its jeans through big-box retailers like Target and department shops like Macy’s, the brand has increasingly driven customers to its own brick-and-mortar stores and online. Not only can these transactions be more profitable, but it also allows Levi to create closer relationships with customers and get more information about their browsing habits. According to the business, direct-to-consumer sales accounted for 39 percent of overall sales in the third quarter, up from 38 percent in the previous period and 36 percent a year before.

On a year-over-year scale, sales in the Americas increased by 26 percent, in Europe by 13 percent, and in Asia by 11 percent. Levi confirmed its fiscal 2022 projection, which aims for revenue to increase by 11 to 13 percent year over year. Reports estimate an 11.8 percent gain. The retailer’s yearly per-share profits are still expected to range between $1.50 and $1.56, compared to analysts’ expectations of $1.54. Chief Financial Officer Harmit Singh was optimistic on growth in the coming times .

The denim category is growing in a low-double-digit rate relative to where it was before pandemic, We’ve seen demand in March maintain the momentum, and that gives us confidence about the rest of the year

he concluded.

Before we go into deep dive of the Q2 results, here is the snapshot of Q2 earnings.

Revenue Distribution – Brands

Looking at the brand-wise revenue distribution, Tommy Hilfiger is leading the revenue chart with USD 803.7 million accounting for 50.4% of total revenue share. Calvin Klein with USD 590.5 million is the second in the revenue chart accounting for 37% of total revenue.
Comparing the same period from the previous year, both brands Tommy Hilfiger and Calvin Klein have registered a massive fall of 28% and 32 % respectively. Overall, the total revenue contracted by 33% which amounted to a total revenue loss of $783 million.

Revenue Distribution – Regions

Calvin Klein

Analysis of the regional distribution of revenue of Calvin Klein shows that revenue from the North America region saw a decline of more than 50% during Q2 2020, revenue fell from $408 million to a mere $199.7 million. Internationally, CK revenue witnessed a fall of 16%. Whereas in 2019 , the revenue from North American and International business was quite close , this time the international revenue is about double that of North American showing clearly that CK suffered more in US.

Tommy Hilfiger

The highest-grossing brand of PVH- Tommy Hilfiger has a similar story, its North American operation has also reported a fall of 51% in its revenue during Q2,2020 however internationally a decline of 14% was reported.

Revenue Distribution – Channels

Whole Sale Channel is beating the retail channel in terms of revenue distribution of Heritage Brands by big margins. Where Retail Channel contributed USD 34.4 Million, the wholesale channel of Heritage Brand contributed USD 152 million during Q2,2020 however both channels were hugely affected and down by 51% during this quarter ended on August 2, 2020.

The Company anticipates its second-half revenue and earnings will continue to be negatively impacted by the COVID-19 pandemic; while the Company expects revenue in the second half to decline approximately 25% compared to the prior-year period, it cannot provide more detailed guidance at this time due to the uncertainty related to the duration and severity of the pandemic.

On the Jan 30 earnings call, CEO Karl-Johan Persson said that

“The supply chain is a key area as well for our transformation, where the focus is on speed, flexibility, and efficiency to create an even better customer experience. And the work spans the entire product flow and — where logistics centers and logistic systems are important parts. We have, for example, opened a new high-tech logistic center in Milton Keynes in the U.K. that will replace several existing centers and serve both stores and online.”

Below are some of the insights and expansion plans according to the latest Press release of H&M:

1. Net sales in the period 1 December 2019 to 28 January 2020 increased by 5 percent in local currencies compared to the corresponding period the previous year.
2. Online and physical stores are being increasingly integrated with continued optimisation of the store portfolio. Around 200 new stores are planned to open in 2020, mainly in growth markets, while at the same time consolidation will continue with around 175 planned store closures, mainly in established markets. The net addition of new stores for full-year 2020 is expected to be around 25.
3. Australia is scheduled to become a new H&M online market in the second half of 2020.
4. H&M will be launched on the ecommerce platform SSG.COM in South Korea in 2020.
5. An agreement has been signed with a new franchise partner in Central America. The first H&M store is planned to open in Panama at the end of 2020.
6. The H&M group’s industry-leading sustainability work has been recognised in various ways; H&M was named by Corporate Knights as one of the World’s Most Sustainable Companies, while in the CDP (Carbon Disclosure Project) the H&M group is the first retail company to be included in the CDP A List.

Below are sales analysis covering the different periods. Please note that the official data were in SEK which we convert in USD. The base date for the conversion is – Feb 7, 2019

SALES IN TOP MARKET – Q4 2019 V. 2018

Germany, The USA, and the UK are three top-selling countries and collectively they contributed approx. 34% in the total sales in Q4 2019, Germany with $913.8 million is at Top. H&M has the highest number of stores i.e, 593 in the USA including 13 new stores which were in Q4 2019. The average sales/store in Q4 stood at $1.26 million/store however China fell short to this and registered a sale of $0.62 million/store only. China also saw the highest closure of stores i.e, 4 in Q4 2019. Russia witnessed an encouraging spike of 24% (highest amongst all) in the sales followed by the USA and Italy.

SALES IN TOP MARKET – Nov 2019 V. 2018

While looking at the comparative sales figure to Nov.19, we’ve learnt that Germany lost its sales contribution by approx 1% from the last year. By the end of Nov.2018, Germany’s share of the total net sales was 15.38% which slipped to 14.41% by the end of Nov 2019. A total of 281 new stores were opened and 173 stores were closed, out of which 31 stores closed in China alone. With 21% of Y-O-Y sales growth, the USA is at the top with $3,108 million of sales by the end of Nov 19, the previous year it was $2,571 million only. Total net sales during this period were $24,131 million which was 11% more than last year.

TOP GROWING REGIONS

H&M has been aggressively expanding to different regions in the last couple of years. In Countries like India, the Philippines, and Mexico, H&M has invested a lot of resources and the results are unprecedented. Alone in India, within a couple of years, H&M opened 47 stores which generated $208 million sales, YOY sales growth by the end of Nov 2019 stood at 43%. Mexico with 52 stores is close to crossing the sales figure of $400 million, the growth was 29% by the end of Nov 19. New destinations including Ukraine and Vietnam have been outperforming and according to the various reports, H&M is going to expand its footprints more aggressively in the coming years.

With reasonable pricing and great supply chain distribution, H&M has been giving tough competition to its rival fast fashion brand Inditex. Zara, one of the leading labels from Inditex has not been able to grow this way as H&M has been growing in emerging developing countries. But it is not to say that H&M is not facing its own share of problems including excess stocks which it needs to dispose off. Time will tell !

AEO recorded 17th consecutive quarter of positive comparable growth.

“The total revenue increased $63 million for the first quarter, rising 8% to a record $886 million. Also, comparable sales increased 6%, building on 9% growth last year” explained Robert L Madore, Executivevice president & CFO of the brand.

This growth could be partially attributed to Aerie’s (Lingerie division of AEO) marketing strategy. Aerie promotes a body positive image and uses pictures of common people actually wearing their products instead of models.

“With Aerie, we have built one of the most relevant new brands ,which is fueled by the deep emotional connection our customers have with that brand” said Jay L. Schottenstein, Executive Chairman of the board & CEO.

Aerie reported a 14% comparable sales growth built on a 38% increase last year whereas American Eagle reported a 4% increase following a 14% increase last year.

During the retailer’s quarterly earnings call with analysts, Chad Kessler, Global Brand President of AE talked about new introductions to their denim catalogue. He disclosed that they will be launching curvy jeans for women and expanding size range to attract more customers. He also discussed about addition of new fabrics and fits to their men’s jean range.

“Our size expansion will deliver on our brand promise of inclusivity and will drive share gains by making us more relevant to more customers than ever before.”

Their growth is not limited only to brick and mortar. AEO has been able to create a 1$ billion plus digital empire which is growing rapidly. Online sales account for more than 50% of sales for American Eagle brand.

When asked about expansion, the brand talked about expansion of the company to markets such as Europe and collaborations in future as a way to reach new customers. Jennifer Foyle, Aerie’s Global Brand President also commented that they are excited about opening new Aerie stores around 60-75 locations this year.

H&M has not really performed well in the first quarter of 2018 with over 2% fall in revenues and Karl-Johan Persson ,CEO , was forthcoming in accepting the same.

“The rapid transformation of the fashion retail sector continues. As communicated previously, the start of the year has been tough. 2018 is a transitional year for the H&M group, as we accelerate our transformation so that we can take advantage of the opportunities generated by rapid digitalisation. Weak sales in the fourth quarter, partly caused by imbalances in the assortment for the H&M brand, resulted in the need for substantial clearance sales in the first quarter. The high level of clearance sales combined with unusually cold winter weather had a negative impact on the sales of the spring garments. In the first quarter the H&M group’s sales were unchanged in local currencies. Many of our ongoing initiatives are giving good indications and results, even though they have not yet been implemented at a large enough scale to have a decisive effect on the overall results. The weak sales development combined with substantial markdowns had a significant negative impact on results in the first quarter.

1. Sales In Top Ten Market: Countrywise

The shares of almost all markets in H&M sales list showed some decline and USA was the highest among them losing over 10% compared to Q1 2017 sales. The table below shows the sales of H&M for different countries for the first quarter of 2017 and 2018, Germany contributes the largest share of about usd 1,010 million for the first quarter of 2017 and with a change of –3% the sales went down to about usd 976 million in first quarter of 2018. The positive change in sales of H&M was seen only in the countries like Spain, Netherlands, Denmark, and Others, where the change was 5%, 2%, 4%, 3%, respectively.

2. Online Expansion

The online expansion will continue in 2018 to countries including India, which opened in March, and via franchise partners to Saudi Arabia and the United Arab Emirates in spring/summer 2018. The plan is to offer e-commerce in all store markets as well as in other markets. New H&M store markets in 2018 will be Uruguay and Ukraine, which will open in the second half of the year. For full-year 2018 a net addition of approximately 220 new stores is planned. Most of the new stores in 2018 will be H&M stores, of which 45 will have H&M Home shop-in-shops, while approximately 90 stores will consist of the brands COS, & Other Stories, Monki, Weekday, ARKET and Afound. In 2018, eight standalone H&M Home stores are planned to open. The table below shows its brands are online in many of the countries where H&M has stores.

3. Stores Count By Brand

Biggest increase in H&M flagship brand stores happened during first quarter.

4. Stores Count By Region

The stores count by region shows that, Europe and Africa regions had a stores count of 2885 stores in 28 feb 2017 and it went upto 2988 stores in 28 feb 2018 , however there was a closure if 20 stores in that region for the first quarter of 2018. Asia & Oceania had a stores count of 902 as on 28 feb 2017 and which went upto 1062 stores in 28 feb 2018, it is also to be seen that there was 16 stores opened in the Asia & Oceania region . North & South America has a stores count of 606 in 28 feb of 2017 which went upto 693 stores in 28 feb 2018, it also saw an opening of 8 new stores in first quarter of 2018.

On the whole, H&M is expanding still but its rate of growth has gone down . It needs to create new ways to take up the digitilization challenge which is chipping away its sales and though it has already done that by opening online stores, it remains to be seen how they perform. Some of the new ones, like in India, have taken off quite well !

“Our strong positive comp and margin expansion during the critical holiday quarter affirms our balanced growth strategy,” said Art Peck, president and chief executive officer, Gap Inc. “Our outlook for 2018 demonstrates confidence in our strategy and a meaningful step up in earnings capacity for the company.” “We are positioning the company for long term growth,” said Teri List-Stoll, executive vice president and chief financial officer, Gap Inc. “In addition to leveraging productivity initiatives to fund investments in the business, recent tax reform changes provide a meaningful increase in future earnings.”

A. Net Sales In Fourth Quarter 2017

The table below shows the nets sales of different brands of Gap Inc. The net sales of Gap Global was USD 1.61 billion and the nets sales of Old Navy Global was USD 2.16 billion which was the leading brand, the least sales was of Banana Republic Global was just 0.73 billion usd, the other segments contributed 0.28 billion usd, the total sales was 4.78 billion usd for the fourth quarter of 2017.Fourth quarter fiscal year 2017 net sales increased 8 percent to $4.8 billion and fiscal year 2017 net sales were $15.9 billion.

The percentage net sales contribution by different brands of Gap Global Inc, in fourth quarter of 2017 shows the significant contribution was made by Old Navy Global of about 45 % of the total sales . Similarly, Gap global and Banana Republic contributed 34 % and 15 % in total sales, the others brands contributed just 6 % in Net Sales.

The percentage net sales in different countries for the fourth quarter of 2017 shows that out of the four countries U.S.A was leading market with 80 % in nets sales the second largest market was in Asia with 8 % whereas Canada was close to Asia with 7 % . Europe and other regions contributed 4 % and 1 % respectively. Gap has , despite efforts, not been able to make significant inroads into the European and Asian markets ,where other leading retailers like H&M , Zara etc are growing.

B. Net Sales For The Full Year 2017

The net sales in different countries for Gap Inc for the full year 2017 again , expectedly, shows that U.S.A was largest in sales with USD 12.57 billion , the second largest sales was made in Asia with USD 1.26 billion but just 8% of sales, , similarly Canada contributed 1.17 billion usd , Europe was the least contribution in net sales with just about 4% of total sales.

The net sales for different brands for the full year 2017 shows that the Old Navy Global contributes largest in sales with 7.24 billion usd, the second largest contribution was made by Gap Global with 5.32 billion usd similarly Banana Republic contributes 2.39 billion usd , the total sales of different brands for the full year 2017 was 15.86 billion usd .

Thus Old Navy Global contributed 46 % of the total sales followed by Gap Global at 33 %

The Net sales for the different countries for the full year 2017 again shows that U.S.A contributes the largest sales of different brands of Gap Inc, with 80% of the total sales contribution , Asia was the second largest contributor and close to it was Canada with 7 %, Europe contributed least margin in net sales .

C. Net Sales Of Different Brands

1. Gap Global

The net sales of one of the brand of Gap inc is Gap Global , the net sales of Gap global in USA shows that USA is the leading market for Gap Global with 0.93 billion usd , Asia was the second largest with 0.34 billion usd , similarly Europe contributes 0.19 billion usd and the little more is contributed by Canada with 0.12 billlion usd .

The net sales of Gap Global for different countries in 2017 shows that U.S.A contributes the largest in net sales with USD 3.07 billion followed by Asia with USD 0.11 billion . Similarly Canada and Europe contributed 0.40 billion usd and 0.63 billion usd in the net sales.

2. Old Navy

The net sales of Old Navy Global for different countries in the fourth quarter of 2017 shows that USA was the major market with USD 1.96 billion usd , Canada was the second largest market with 0.16 billion usd ,the least contribution was made by Asian regions.

3. Banana Republic

The net sales for Banana Republic Global for different countries in the fourth quarter of 2017 shows that the USA had the major market of 0.62 billion usd and the second largest market was Canada with 0.07 billion usd. Europe and Asia had considerable low contribution to the net sales for the fourth quarter 2017.

D. Net Sales In Different Countries

1. U.S.A

In the USA regions the sales for the fourth quarter of 2017 shows that, Old Navy Global was largest brand for Gap with USD 1.96 billion of sales . Gap Global was the second and followed by Banana Republic.

2. Canada

The sales in Canada for the different brands for the fourth quarter of 2017 shows that Old Navy Global contributes the largest sales with 0.16 billion usd of sales followed closely by Gap Global and there was a relatively less contribution by Banana Republic Global.

3. Europe

It is surprising to see that In the Europe region there were only two brands which contributed in sales for the fourth quarter : Gap Global and Banana Republic Global. Old Navy is nowhere to be seen !

The net sales in Europe for different brands in 2017 shows that Gap Global contributes 0.626 billion usd whereas Banana Republic Global contributes 0.015 billion usd . This shows that Old Navy has actually no presence or standing in Europe.

4. Asia

The net sales in Asia for different brands for the fourth quarter of 2017 shows that Gap Global was the largest contributor in sales followed by Banana Republic . Old Navy has a small presence which again shows that besides US market , Old Navy struggles in other regions and is not able to achieve the sales.

c. Stores Informations (Stores In Numbers)

The stores information for the fourth quarter of 2017 was as follows. The stores count given below shows that for Gap Inc, North America had the most stores count of 810 stores and also largest closure of 27 stores whereas Asia had a stores count of 313 stores in fourth quarter of 2017 with most openings of 28 stores.

Old Navy had maximum concentration of stores in North America with a count of 1,066 stores count and also max openings of 12 stores. Old Navy is definitely very weak in Asia !

Banana Republic had most stores in North America with about 596 stores with major closures of 21 stores. In all , Gap closed 101 stores and opened 56 – a net closure of 45 stores !

1. Sales By Region

Europe was the leading market for the year 2017 with about 1.6 billion Euros which constituted 62 % of the total sales with just a marginal 1% increase over last year. Americas with their share of 21% come next but again the performance was flat with a turnover of about Euro 570 million. Asian Pacific region comes next with a 14% turnover. The company did not show any growth during the year 2017 with a minor positive of 1% being a consolation . However, given the tough times for retailers, it may not be considered as a bad performance.

2. Sales By Distribution Channels

Group focuses more on retail through its own shops and that is where over 60% of turnover is coming from. Wholesale is the next big segment with about 34% share. The total sales for all the distribution channels for the year 2017 was 2733 million euro and in the year 2016 was 2693 million euro with 1 % change in the sales from 2016 to 2017. The percentage change in sales was positive for all channels except the wholesale channel which saw an negative change of –3%.

3. Sales By Brand

Boss is really THE BOSS ! Accounting for over 85% of turnover , it really dominated the other brand HUGO. But the growth % in the HUGO brand was higher at 4% while BOSS lagged behind at 1%.

4. Sales By Gender

The sales of Hugo Boss by gender shows that the men’s wear contribution was about 8 times more that of the women’s wear for the year 2016 and 2017, the sales contribution of menswear for 2017 was 2440 million euro , similarly in the year 2016 the sales contribution of menswear was 2394 million euro with positive 2% change in sales from 2016 to 2017. The sales contribution of womenswear was 293 million euro in 2017 and in the year 2016 was 299 million euro with negative change of 2% in sales from 2016 to 2017. However, the total sales saw the positive change of 1% from 2693 million euro in 2016 to 2733 million euro in 2017.

5. Stores Information

The stores count in Europe shows that the free standing stores were 192 stores, shops in shops were 351 and outlets were 65 stores , Europe has a largest stores in all out of the three region mentioned below with 608 stores. The stores count in America shows that free standing stores were 90 stores, shops in shops were 99 stores and outlets were 50 stores, America has the largest number of shops in shops. In Asia/Pacific the number of free standing stores were 157 stores, shops in shops were 88 and outlets were 47 stores.

On the whole, we find that Hugo Boss did not grow in 2017 but managed to remain at the same level where many retailers have been hit hard. This by itself is an achievement .

The group , based in Hong Kong , has production facilities in China, Vietnam, Cambodia, Bangladesh and Sri Lanka . Their products are categorized in five main categories ie Lifestyle Wear, Denim, Intimate segment, Sweaters and Sportswear & Outerwear. We will analyze below their performance for 2014-2016 (their latest figures will be analyzed in another report).

1. Revenue By Product Category

The revenue from lifestyle segment was about 785 million usd with 46% of the total revenue in 2014 which saw a decrease to about 748 million USD in 2016 with about 42% of the total revenue in 2016.

The second largest revenue generator for Crystal International group ltd was denim’s segment , the revenue was about 332 million usd with 19.5% of the total revenue for 2014 which increased to 484 million usd with 27.5% of the total revenue in 2016. This was indeed a great increase of more than 40% in 2 years !

The third largest revenue generator was Intimate segment with revenue of about 245 million usd with 14% of the total revenue for 2014 which in 2016 increased to about 22% to about 294 million usd with 16.7% of the total revenue.

The fourth and fifth largest revenue generator were Sweater and Sportswear& Outwerwear segment with revenue of about 272 million usd and 223 million USD in 2016 respectively.

2. Sales Volume By Product Category

The Sales by category by Crystal International Group Ltd saw that the lifestyle segment had the highest sale of about 177 million pcs with an average price of USD4.2 in the year 2016.

The denim segment had the second largest sales volume of about 40 million pcs with an average selling price of USD8.4 in the year 2014 which increased most rapidly to about 56 million pieces – a growth of about 40% in 2 years ! This was the highest growing segment for Crystal.

The Intimate segment had the third largest sales volume of about 73 millin pcs with an average selling price of USD3.3 in 2014 which saw an increase of about 12% to 82.02 million pcs with the average selling price of USD2.9 in 2015 which further increased about 10% to 90.11 million pcs with an average selling price of 3.3 in 2016.

The Sweater segment had the fourth largest sales volume of 25.04 million pcs with an average selling price of 8.9 in 2016.

3. Revenue By Geographic Regions

The table below shows the revenue by geographic region , the largest part of revenue was from Asia Pacific for the three consecutive year from 2014 to 2016 with the revenue of 609 million usd in 2014 which increased to 695 million usd with 34.8% of the total revenue in 2016. This shows that the company is well entrenched in all East Asian markets including China which gives it its whopping 600 million usd sales in this region alone.

U.S contributes the second largest revenue by region – 530 million usd with 31.2% of the total revenue in 2014 which saw an increase of about 11% to 586.06 million usd with 34.7% of the total revenue in 2014, the revenue increased further about 5% to 614.07 million usd with 34.8% of the total revenue in 2016.

Europe contributes the third largest revenue by region with 520 million usd and 30.6% of the total revenue in 2014 which decreased to about 11% to 392 million usd with 22.4% of the total revenue in 2016.

There is no doubt that Crystal is a very important global apparel group given its size . Being the largest company producing denim apparel makes it very special for the industry . The company expects to keep on growing rapidly over the next few years and it is poised to achieve greater heights. We will further analyse their growth and performance in another report.

Analysis Of Financials

The net revenue for the Year ended on November,2017 for the Americas, Europe and Asia has been $2,774 , $1,312 and $818 millions respectively . Europe region has evolved as the leader in terms of revenue growth with 20% surge in a year. In the year 2016 , the net revenue for Europe region was $1,091 million which increased by $221 million in the year 2017 . The rest – Americas and Asia experienced a marginal growth of 3% and 5% respectively when seen annually. Europe , however, gained a very decent sales of over 20% over 2016.

Net Revenues For Year Ended Nov. 2017 Vs Nov. 2016 ( In $ Millions)

The 4th quarter was particularly good for Levis. European market grew 28% over the same quarter Asia posted an uptick of 13% in terms of revenue growth. The market of America isn’t too responsive and there are reasons behind it. Asian and European growth is on right track and will continue to grow in coming years. In the same quarter of 2016 , Americas contributed 62% in total net revenue which has been decreased by 4% in this quarter .

Net Revenues For Year Three Months Ended Nov 2017 Vs Nov2016 ( In $ Millions)

(source : Bloomberg)

Women Leading The Growth

Levi’s is experiencing a straight 10th quarter growth in women denim sales. This is a very good sign specially seen in context of ‘Athleisure’ trend chipping off the sails of many a retailer. However, Levi’s was wise enough not to board the ‘Athleisure’ bandwagon and focused on what they did best. Only they mae their denim products more adaptable , more flexible , more stretch for the new demands from the consumers. The growth for Levi’s seems to be hinged on two main terms : ‘Women’ and ‘ Overseas’ .

Chip Bergh, CEO , was expectedly ecstatic and said.

“Our growth and momentum accelerated in the fourth quarter, capping the strongest revenue year the company has had in more than a decade,” chief executive and president Chip Bergh said. “Our strategies are working and the investments that we’ve made to diversify our business over the past few years are paying off, best demonstrated by the strength of the Levi’s brand globally.”

]]> https://www.denimsandjeans.com/brands/denim-brands-international/levis-posts-highest-growth-decade/31677/feed 0 https://www.denimsandjeans.com/latest-denim-reports/financial-results/gap-inc-3rd-quarter-sales-analysis/30196 https://www.denimsandjeans.com/latest-denim-reports/financial-results/gap-inc-3rd-quarter-sales-analysis/30196#respond Mon, 20 Nov 2017 07:45:27 +0000 https://www.denimsandjeans.com/?p=30196 Gap Inc. shows a strong performance in difficult times with sales up by 1 percent . In times when brick and mortar stores are finding it difficult to sustain and many have closed, there is some vaccum left which is being filled in by retailers like Gap . Though the performance cannot be termed great but it seems quite good when compared with most other retailers. The driving force has been Old Navy.

1. Old Navy Global: Positive 3 percent growth compared from last year.
2. Gap Global: Negative 1 percent growth compared from last year
3. Banana Republic Global: Negative 1 percent growth compared from last year.

Net Sales Results

Net sales for the third quarter of fiscal year 2017 were $3.84 billion compared with $3.80 billion for the third quarter of fiscal year 2016. Third quarter net sales details appear in the tables . There is an increase in Net Sales by 1% from the last year however if we compare the figure of sales for the 9 months , we realized that there is decline in Net Sales i.e, from $11.08 billion to $11.07 billion . The Net Sales – Net Profit seems more encouraging as it has increased from 5% to 6%.

Revenue From Brands In Different Regions

Looking at the brand’s revenue distributions in different regions , we noticed that USA lost its share in sales for Gap Global And Banana Republic Global however For Old Navy And Other Brands increased their share in USA region. Canada performed very well in all brand segments as it didn’t lose share in sales for any brand for the Q3,2017 . Asian region is the biggest disappointment for the Q3 as in all brand segments , it lost its share substantially. Where the brands like H&M and Zara have been performing so well in Asian Market , it is strange to see the diminishing position of GAP . Probably , its mid segment placement is the problem.

Region Wise Sales

So far as the % of sales from different regions are concerned , US contributed 79% of sales which is 2% more that the last year . All the other regions excluding Asia remained constant in terms of sales in Q3 . Asia lost the share in the total sales by 2% and the reason might be the stiff competition from the rival brands like H&M.

Store Count on Beginning of Q3 and At the End Of Q3

The company ended the third quarter of fiscal year 2017 with 3,639 store locations in 46 countries, of which 3,193 were company-operated. The company now expects to close about 30 company-operated stores, net of openings and repositions.

Segments

Denim seems to be strong with particular strength in women’s denim which grew over 13% as an individual segment. Old Navy is now among top 5 value denim retailers in the US and going strong based on its product and value pricing which shows that brick and mortar stores are able to draw the consumers based on pricing. Activewear has been the strongest growth driver contributing over $1 billion in revenues. Athleta – the activwear brand of GAP – is witnessing strong growth. As per NPD, the size of Athleisure market in US is a huge $44 billion and increasing 10% each year. Hence this segment opens big opportunites for GAP and other retailers. Improved sales in Women’s denim is also a reflection of this trend as many styles of women’s denim have athleisure features.

Gap is also taking E-commerce seriously. It has been investing in developing online business and is targeting over $3 billion in sales in coming years. To this end it is trying to integrate its Offline and Online offerings with online facilities like “Reserve in Store, Pick up in store , Ship from Store ” etc. The idea is to give pure ecommerce companies a run for their money by providing dual service to the consumers .