Gap Inc. Revenue Recap

by Talia Lambarki, MBA

“The Gap, Inc. is a global specialty retailer offering apparel, accessories, and personal care products for men, women, children, and babies under the Gap, Old Navy, Banana Republic, Piperlime, and Athleta brands…The Company operates in two segments: Stores, which includes the results of the retail stores for Gap, Old Navy, and Banana Republic, and Direct, which includes the results for its online brands, both domestic and international.” (Gap Inc. 2011 Disclosure). The stores segment contributes 91% of net sales for the company, while the direct segment contributes 9%.

In 2007, total revenue from both segments was $15.8 billion, the gross profit was $5.7 billion, and net income was $833 million. In 2008, revenue declined to $14.5 billion, gross profit dropped to $5.5 billion, but the net profit rose to $967 million as a result of eliminating long-term debt, which was a strategy implemented in 2002, and opening franchised stores in the Middle East and Asia. The recession in the U.S. contributed to the decline of revenues. In 2009, revenues continued to decline to $14.2 billion. However, the gross profit rose to $5.7 billion, and the net profit rose to $1.1 billion. From there, revenue went on to increase by 3.3%, for a total of $14.7 billion by the end of year 2010. As a result, their net profit increased by about 9% to $12 billion.

It is in the best interest of Gap management to continue upward trends, especially since the company operates in such a competitive industry. However, revenue does not always trend upward, it fluctuates. There was a decline in revenue of about 0.8% or $14.5 billion for FY2011 compared to the prior year. Nonetheless, the company’s profitability can still be used to fuel further global expansion, product development and innovation, and advertising efforts for revenue growth.