Specialty Retails Stores Feel Pinch From Softer Sales

Softer sales are hitting the specialty retail segment. The Gap, which has seen declines since early in the decade again saw same-store sales drop in the quarter ending August 2. Sales at the company's Gap, Banana Republic, and Old Navy stores were $3.50 billion versus $3.69 billion for the quarter last year.

The company's second quarter comparable store sales decreased 10 percent, compared with a decrease of 5 percent in the second quarter of the prior year. The company's online sales for the second quarter increased 11 percent to $191 million, compared with $172 million for the second quarter of last year.

The company said sales at Gap North America stores were down 6% to $999 million; at its Banana Republic stores in North America sales also dropped 6% versus the quarter last year; Old Navy sales were off 16%.

Limited Brands, which includes Victoria's Secret and Bath and Body Works saw comparable store sales for the second quarter decrease 7%, with net sales $2.284 billion compared to $2.624 billion last year. Abercrombie & Fitch reported comparable store sales decreased 4% in the second quarter. American Apparel and American Eagle report next week.



In New York consultancy Brand Keys' latest Customer Loyalty Engagement Index, which tracks brand engagement, customer behavior and sales, the top specialty retail brand was Victoria's Secret, followed by H&M and American Apparel tied for second place, J.Crew and PacSun tied for third, American Eagle and Abercrombie and Fitch for fourth, and the Old Navy tied The Gap for last place.

Brand Keys president Robert Passikoff says The Gap has a sustained problem with brand identity that isn't solved by using stars in ads. "Celebrity is borrowed equity," he says.

According to Brand Keys, which follows 57 categories containing nearly 400 brands, the influence by percentage that "customization" has had on product and service engagement, adoption, and loyalty (and, therefore, profitability, per the firm) has increased five-fold since 1997 from 4% to 18%.

Passikoff says The Gap has not successfully mined the growing customization trend in spite of the black and white high-art advertising featuring various actors and artists that have a strong message about personalization.

He says customization, for consumers, is more than a "mix and match with what we have available" approach. "It not really the same thing as what people are looking for, which is the ability to imbue whatever it is with their own values," he says.

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