Under the epidemic, the Chinese market has become a “life-saving straw” for many foreign brands, but this fast fashion brand is considering accelerating its exit…
According to foreign media reports, GAP Group is considering potential options, including selling its Chinese business, to adjust its operations in China.
Affected by this news, when the US stock market closed on the morning of the 9th, GAP’s stock price rose 5.75% and hit a new high in a year.
Come on the hot search
As soon as the news came out, ” The topic “GAP is considering selling its Chinese business” immediately rushed to the forefront of today’s hot searches.
Many netizens left messages complaining that GAP’s clothes have a single style, are too expensive, and are not cost-effective. In recent years, there have been problems such as poor product quality and poor comfort. Netizens are generally not surprised that GAP lost the Chinese market.
Many netizens reported that GAP’s quality is poor, its price is high, its price-performance ratio is not high, and it is not as good as Uniqlo.
Even GAP’s loyal old fans also said that the quality of the clothes is ridiculously poor and they are no longer Buy anything from him.
GAP is considering selling its China business and may completely exit the UK and European offline markets in July
Bloomberg March 9 According to reports, according to people familiar with the matter, American clothing giant GAP Group is considering potential options, including selling its Chinese business, to adjust its operations in China.
GAP is currently working with a consultant to study various options and has contacted potential buyers, said the person, who asked not to be identified because the information was private. to assess acquisition interest. However, as relevant negotiations are still in the early stages, the company may decide to retain this business. A GAP representative declined to comment.
It is worth noting that before the news of the business change, GAP was increasing its investment in the Chinese market. At present, GAP has been in China for more than 10 years and has opened about 200 stores across the country. Except for the surprising news that the group’s sub-brand Old Navy announced its withdrawal from the Chinese market at the beginning of last year, it seems that GAP has no obvious signs of withdrawing from the Chinese market. However, if we look at GAP’s global actions, we can get a glimpse of “clues.”
In fact, as early as last year, GAP revealed its intention to withdraw from the European physical retail market.
On October 22 last year, GAP Group proposed a three-year reform plan aimed at adjusting global business to stimulate growth. This includes an ongoing strategic review of the European business and the possible closure of GAP stores operating in the UK, France, Ireland and Italy by the end of the second quarter of 2021. At the same time, as GAP plans to transform into a business model that combines e-commerce and non-mall offline stores, the group is looking for alternative ways to operate its European e-commerce business.
In February this year, GAP promised to pay off the rent for stores that are about to close by July. This also means that GAP may completely withdraw from the physical retail market in the UK and Europe in July, retaining only its online business. However, since GAP can only afford lower interest rates, most landlords say it is unacceptable and may file lawsuits against the group for unilaterally terminating leases.
It is understood that the closure of GAP stores has further accelerated since the epidemic. As of October 2020, GAP’s number of stores in Europe has been reduced by 122 from 152 the previous year. GAP currently has 95 stores in the UK, which is the main market for its European business. However, in the 2019 fiscal year as of February 2020, Gap’s UK revenue fell 9.5% to 195 million pounds, and its operating loss exceeded 40 million pounds.
In the European market, facing more powerful European local competitors, such as H&M, Zara and other brands, the American-style GAP may be increasingly less attractive to local consumers. GAP’s European business revenue fell to US$539 million in fiscal 2019 from US$603 million the previous year. Banana Republic, a high-end brand owned by Gap, closed all eight stores in the UK in 2016.
After eight consecutive years of declining performance, the GAP brand is no longer the core of the group
In overseas markets In addition, GAP’s adjustments to the domestic market in the United States can also be described as drastic.
In 2020, GAP Group has closed 228 GAP and sub-brand Banana Republic stores. In 2021, GAP plans to continue to close approximately 100 stores of these two brands globally. stores, 75 of which will be concentrated in the North American market.
The reason why the store was quickly closed and the focus of offline business was shifted to online was that the GAP brand��The overall decline is its essential cause.
According to the latest financial report released by GAP Group, in the fourth quarter as of January 30, 2021, GAP Group’s sales fell 5.3% to 4.42 billion yuan compared with the same period last year. Net profit was recorded at US$234 million, which improved from a loss of US$184 million in the same period last year.
For the full year of fiscal year 2020, GAP Group’s sales were US$13.8 billion, a year-on-year decrease of 15.7%, with a net loss of US$665 million, while a net profit of US$351 million was recorded in the same period last year. . In this regard, group CEO Sonia Syngal said that the company is facing “the most difficult year in history” but will achieve recovery in 2021 by implementing the previously released growth plan.
Specifically, the group’s eponymous brand GAP was deeply affected by store closure measures. Comparable sales fell by 7% in the fourth fiscal quarter, and full-year revenue fell by 7% year-on-year. Decreased 26.8% to US$3.39 billion. This is the eighth consecutive year that the brand has experienced a decline in performance. Compared with US$6.35 billion in 2013, the revenue of the GAP brand has almost halved.
At the same time, Old Navy, which has surpassed its performance since 2014, is further widening the performance gap with its main brand GAP, achieving sales of US$7.54 billion throughout the year, accounting for the overall 54.5% of sales, while Gap only accounted for 24.6%.
The best performer of GAP Group last year was the women’s sports and leisure brand Athleta. The brand seized the market demand for women’s clothing at home during the epidemic and attracted US$1.414 billion in revenue throughout the year, with sales soaring. 15%.
Out of optimism for sports and leisure clothing, the current core business of GAP Group has changed from the eponymous brand GAP to Old Navy and Athleta. From the number of stores It can also be seen from the adjustment that GAP Group’s resources will be further tilted towards the two brands of Old Navy and Athleta. In fiscal year 2021, GAP Group plans to open 30-40 new Old Navy stores and 20-30 Athleta stores. Looking forward to fiscal 2021, the group expects net sales to increase by approximately 15%, with net sales at Old Navy and Athleta increasing by 70%.
In contrast, judging from the group’s three-year reform plan and fiscal year 2021 layout, the future development of GAP, the former group’s main brand, will become increasingly difficult.
Last year, GAP Group’s performance was poor, but its stock price soared 300% in a year
However, despite last year GAP Group’s overall revenue has declined significantly, but the group’s vigorous adjustment measures have also gained the favor of a lot of capital.
After GAP stated that it is conducting a strategic review of its European business and may close Gap stores operating in the United Kingdom, France, Ireland and Italy at the end of the second quarter of 2021. Many investment banks on Wall Street are optimistic about this move and have raised their target prices for GAP.
Among them, RBC Capital Markets raised its target price to $28, Barclays raised its target price to $27, and Telsey Advisory Group raised its target price. to $23. All three companies agree that GAP’s plan to downsize by cutting unprofitable stores is the right move.
In the capital market, after the outbreak of the overseas epidemic, although GAP’s stock price plummeted by only 70% to a low of US$5.07 in the seven weeks from the end of February to early April last year, it hit a low of US$5.07. After rebounding from the bottom, the company’s stock price has been rising. As of the close of trading on March 9, GAP Group’s share price has soared by more than 300% in a year to US$28.88, with the latest total market value being US$10.8 billion (approximately RMB 70.5 billion).