An Apparel Retailer You Shouldn't Miss
Kaitlyn is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Gap (NYSE: GPS) continues to widen the gap between with other retail giants. With a recent corporate restructuring and high cotton prices, Gap has creatively overcome challenges with solutions that work. With stiff competition from giant online retail stores such as Amazon, Gap and other retail stores are having to innovate efficiently to keep up with the changing market.
In 2012, Gap decided to recreate its brand management structure under a long-term growth plan. This plan allows multiple brands to scale across streamlined channels while pushing into international markets that are fashion-hungry. As Gap continues to look for new growth opportunities, there are several markets which will maximize returns over the long haul. China, Brazil, and Japan each have a different target market, and with new branding structure, brands are targeted efficiently to maximize profit within each country.
Splitting up each country by brand maximizes effective growth in emerging markets. China spends billions of dollars on apparel while Japan is more focused on value. With each brand divided across the globe, Gap has a breakdown model to scale in these developing markets.
Efficient supply chain model
In the age of digital, consumers are shopping online more than ever before. With rising online demand, Gap is striving to make the best use of perishable inventory. With expiring seasonal merchandise, the new supply chain model makes use of inventory sitting in stores as well as maintaining a lean supply chain. Instead of products sitting on the shelves, this efficient method uses sitting inventory to fulfill online purchases and increase operating margins.
With specialty chains like Piperlime and Athleta, Gap hopes to capture specialty markets as well. With niche markets growing at a rapid pace, Gap hopes to cash in on new and emerging markets in North America, as well as gain market share in international markets.
Lululemon Athletica (NASDAQ: LULU) has cornered the yoga apparel market well. With previous quarter's revenue increasing 31% to $485.5 million and same-store sales increasing 10% on a constant dollar basis, Lululemon has increased stores and market share in rough economic times while maintaining unusually high operating margins. Even with the recent news of quality control errors, the share price has bounced back and continues to dominate the yoga apparel industry.
Under Armour (NYSE: UA) is also well known for high-priced athletic apparel. The company just stated that first-quarter net revenue increased 23% to $472 Million. Under Armour has reported a 20% or more increase over the last 12 quarters in apparel revenue. They attribute their strong performance to new innovation and design as well as increased momentum in Studio and ArmourBra, both in Women's Apparel. This flourishing market for Women is quickly becoming a battle for market share between these three clothing brands.
The Gap app
With quality investments in new technology, Gap is trying to enhance the customer experience in new and improved ways. With the recent addition of physical stores for Althleta, as well as a new shipping supply model, digital shopping is becoming the new trend. With in store sales decreasing as online shopping becomes more popular, the store hopes that the features in the app will drive more traffic inside the store. The app also uses the new supply chain model to help the customer find merchandise and connect with store associates.
The low down
Gap is well positioned to take on the market for global growth. With strong positions in global markets as well as the North American region, while implementing new management structure, I think that Gap will do well in the coming years. Their early position in emerging markets will continue to serve them well in the days ahead.
Lululemon has the potential to grow its sales by 10 times if it can penetrate its other markets like it has in Canada, but the competitive landscape is starting to increase. Can Lululemon fight off larger retailers and ultimately deliver huge profits for savvy investors? The Motley Fool answers these questions and more in its most in-depth Lululemon research available. Thousands have already claimed their own premium ticker coverage; gain instant access to your own by clicking here now.
Kaitlyn Tokay has no position in any stocks mentioned. The Motley Fool recommends Lululemon Athletica and Under Armour. The Motley Fool owns shares of Under Armour. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!