Gap Blames Lower Results On Marketing Troubles
Gap Inc. Chairman and CEO Glenn Murphy took the company's marketing to task this week, saying that the effort shared some of the blame for the company's lackluster first-half results. Murphy's remarks came during a conference call with analysts to discuss second-quarter earnings that were issued Thursday.
The company reported a 19% drop in net income to $189 million on a 2% gain in total sales to $3.4 billion for the quarter. But same-store sales -- a key metric -- were down 2%.
According to a transcript of the earnings call produced by Seeking Alpha (www.seekingalpha.com), Murphy said: "We had some ineffective marketing in the first half." He specifically called out subsidiary Old Navy, stating that the company "had some good story lines but the marketing did not pull -- did not drive traffic as much as we wanted. We're still very fixated on getting new customers in our stores."
Murphy told analysts that an Old Navy TV ad campaign that launched in March, from Crispin Porter + Bogusky, was being put on the "back burner" and that a new "stop gap" campaign would launch this weekend. "The Old Navy creative and marketing messages and the strength of Old Navy's aggressive marketing to drive traffic to their key customer ... it needs to get better," he said.
A CP+B rep said the agency had no comment on the matter.
Murphy also indicated there would be a "shift in our media mix in the back half [of the year], definitely a lot more online media. We've been testing that for the last six months. We like the early response."
Last December, the company consolidated its $350 million global media assignment with PHD, which had been the U.S. incumbent. The U.S. is where the company places most of its ad dollars -- $275 million in 2009, according to Nielsen.
Gap executives said that marketing expenditures were up in the second quarter versus the same period a year ago, and that third-quarter spending would also be up. In addition to an increase in online expenditures, direct marketing will also get a boost, they said.