US Retailer Gap Quits TV for Instore Promos - and 40% Profits Hike

02 June 2008

NEW YORK: Although only a casuist would draw hard and fast conclusions from such sparse data, it isn't good news for the US TV industry that a major retailer like Gap boosted its bottom line after quitting the medium in favor of instore merchandising for several successive quarters. 

The switch trimmed 18% off the firm's marketing expenditure during its most recent quarter, contributing to a 40% year-on-year leap in profits.

However, Gap has not totally eschewed TV, its budget label Old Navy is still present on the small screen, although possibly not for much longer.

Notes Stifel Nicolaus analyst Richard Jaffe: "Old Navy is clearly the most challenged [brand], while Gap appears to be moving in the right direction … At best, this remains a multiyear challenge, particularly in light of the difficult retail environment."

Analysts – whose percipience is generally enhanced after their latest peek at a firm's bottom line – are in approving mode over Gap's exit from TV.

Says retail analyst Jennifer Black: "It's a waste of money [for the Gap brand to advertise at this moment in time].

"In this kind of an economic environment, traffic is slow anyway, and there's so much competition with advertising ... You really want to yell and shout and scream about the product when it's really fantastic."

A Gap spokeswoman told Advertising Age that the corporate brand will remain absent from TV through the second quarter, as it did last year. Plans for the third and fourth quarters are still undecided.

Meantime the retail giant's agency, Laird & Partners, New York – as well as the TV industry – will be crossing their fingers that Gap will not be seen by other advertisers as a role model.

Data sourced from; additional content by WARC staff