Gap Inc.s Key Performance Indicator and Retail Strategy

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Table of Contents

Sales
Operating Profit
Gross Margin
Average Store Size

Sales

Gaps sales grew significantly between 2000 and 2004, signifying a period of economic success. Notably, this tendency contradicts the display in the text, which claims that sales slowed in 2000 and hardly grew in 2001. The claim that sales growth slowed but did not stop can explain 2000, but the rise in 2001 directly contradicts the claim that sales grew only 1%. In the next two years, the sales began increasing due to the appearance of the new director, Paul S. Pressler. However, they peaked in 2004 and started slowly declining until 2007, when a sharp drop occurred. This change can be attributed to the leadership of Glenn Murphy, who assumed the CEOs position at the time. However, the new executive was eventually able to recover the companys sales and return them to the level close to that at his arrival by 2012.

Operating Profit

Gap began the period of 2000-2012 with a steep drop in its operating profits, caused by its misjudgment of fashion trends in 2000. The company was able to recover in 2001, and the new CEO, Paul S. Pressler, continued the trend of improving operating profits in 2002 and 2003. However, similarly to sales, operating profits peaked then and began declining to a level similar to those before the managers appearance. He was able to start recovery but was replaced by Glenn Murphy in 2007. Murphy concentrated on increasing operating profits, continuing the growth steadily until 2011. At that time, the staff replacements and other issues, such as the emergence of large competitors who were able to outsell Gap led to a drop in the KPI, but the value recovered to its 2010 level in 2012.

Gross Margin

Gaps gross margin dropped significantly in 2001, most likely due to the aforementioned failure of the company to follow the trends that made sales and discounts necessary to liquidate the goods. It began recovering in 2002 when Pressler took the lead. However, like the other statistics, the KPI peaked in 2004 and began declining afterward. The fall continued until 2007 when Murphy assumed leadership and began working on recovering profits. The efforts were successful until 2009 when both Inditex and H&M overtook Gap as the largest specialty apparel retailer. The effect manifested in full force in 2011, with a steep drop to the gross margin. However, Gaps management was able to stabilize the situation somewhat, and the decline was less severe in 2012, though still present.

Average Store Size

Gap expanded its stores considerably in 2001, likely expecting its rapid expansion to continue, but the misjudgment came as a surprise. As such, its growth slowed, but continued nevertheless, as Presslers policy was to close underperforming stores and open new ones, though slower than before. The increases continued throughout Presslers entire tenure in the company except for a small drop in 2006, where the companys performance began declining, and the CEO was fired. Fisher was able to continue the trend, but Murphy started to shrink stores as part of his cost-saving policy. He began investing in online sales, which did not require physical store space to occur, and so the companys brick-and-mortar locations continued shrinking throughout the period until 2012. The drop in 2008 is likely sharper than that in 2009 due to the increasing prominence of Inditex and H&M, which forced Gap to cut costs quickly. Its recovery enabled the company to conduct the process more steadily later.

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Gap Inc.s Key Performance Indicator and Retail Strategy

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