Gap Inc. sees value in diverse portfolio as inflation bites

Gap Inc., the retail holding company, believes that having a "value to premium" portfolio of brands is a useful asset as it seeks to connect with a diverse range of consumers in the face of rising inflation.

Why it matters

A spike in the cost of living has exerted a different impact on consumers depending on their income level. Companies that can serve customers across a variety of price points are thus able to engage with audiences in nuanced ways as their needs diverge.

Takeaways

• Sonia Syngal, Gap’s Inc.’s CEO, noted on an earnings call that there was a clear “strain of inflation” on people earning less than $50,000 per year.
• “I was in an Old Navy store where the average income was about $100,000, and [there was] really very little shift in consumer behavior in terms of buying routines,” she said. “And I also then went into an Old Navy store that had a $50,000 consumer [income], and you could see basket sizes down, you could see frequency down.”
• Gap Inc.'s Athleta and Banana Republic brands are higher-end propositions, while Gap is a “mid-market” chain, meaning its slate of offerings can assist shoppers with different budgets.
• Old Navy has “as many customers that earn over $100,000 as they do below $75,000”, added Syngal, with its kids and baby goods popular with shoppers with higher incomes.
• ”The range in value to premium is part of the benefit of the portfolio,” she continued.

Sourced from Motley Fool