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Specialty Numbers: Gap Stars as Markdowns Hit Competition

Gap Inc. scored twice on Thursday, once with strong second-quarter earnings and again by coaxing Patricia DeRosa out of her retirement.

As reported, sales declined 13.8 percent to $126 million from $146.2 million in the period and comps slid 19.8 percent. While declining throughout the quarter, comps improved somewhat as the second quarter unfolded. May comps declined 25 percent, while June’s were off 21.5 percent and July’s 12.9 percent.

Walter Parks, executive vice president and chief administrative officer of the Foothill Ranch, Calif.-based specialty chain, said in a statement, “We continue to focus on streamlining operations and capturing additional savings to bring our cost structure more in line with current sales.”

The company continues to struggle with merchandise missteps in the core Wet Seal division, according to Peter Whitford, chief executive officer.

There have been positive trends in bottoms and strong indications that activewear will perform for back-to-school, the ceo noted. “But the success is tempered with tops,” Whitford said, estimating that about half of the tops business – synthetic printed and sheer tops — is underperforming and taking a backseat to knits. Anything not working will be “aggressively” marked down, he said.

As reported, Wet Seal on Wednesday named Allan Haims president of the Wet Seal division and Victor Alfaro its senior vice president and creative director. As Alfaro will join the company in early September, his merchandising influence isn’t likely to be felt until next year.

“Victor Alfaro will make Wet Seal the business of choice for the fashion-savvy teen,” Whitford said.

In other news, Steven Strickland, the company’s senior vice president of creative marketing, resigned for personal reasons. Whitford said a replacement will be appointed soon.

For the third quarter, the company expects a net loss of between 22 and 26 cents per share.

For the six months, the net loss tallied to $21.9 million, or 74 cents a diluted share, versus net income of $12.4 million, or 39 cents. Sales plummeted 17.5 percent, to $249.7 million from $302.8 million, and comps contracted 22.8 percent.
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