Gap Q4 profit falls 12.5% but tops Street; expanding Athleta banner
San Francisco — Gap Inc. on Thursday reported a 12.5% decline in fourth-quarter profit, with its results impacted by heavy discounting during the holidays. The retailer also issued a profit outlook for the full year that is below analysts’ expectations, and said it will open 30 additional U.S. stores during fiscal year 2014.
Gap reported net income of $307 million for the three-month period ended Feb. 1, better than the Street expected, down from $351 million in the year-ago period.
Revenue totaled $4.58 billion, down from $4.73 billion. The company noted that fiscal year 2013 had 52 weeks compared with 53 weeks in fiscal year 2012. Same-store sales were up 1%.
Net income for the 52 weeks ended February 1, 2014 was $1.28 billion, compared with net income of $1.14 billion for the year-ago period.
“We are pleased to deliver another year of profitable growth for our shareholders,” said Glenn Murphy, chairman and CEO of Gap Inc. “Engaging customers across our multi-channel portfolio of brands positions us well on our path to winning in the global marketplace.”
Net sales increased $497 million to $16.15 billion for the 2013 fiscal year compared with net sales of $15.65 billion for the 2012 fiscal year. Same-store sales were up 2%.
In fiscal year 2014, the company expects to open about 185 company-operated stores, with a focus on China, Old Navy Japan, Athleta and global outlet stores. The company expects that it will close about 70 company-operated stores, net of repositions.
Gap to make Mainland China debut
San Francisco — Gap Inc. is bringing its Old Navy brand to China, with the opening of a store on March 1 on Shanghai’s famous Nanjing West Road.
The 22,000 –sq.-ft., three-level Shanghai Old Navy store is located in the Jing’an District, a major commercial area known for shopping, sightseeing, hotels and office buildings that draws thousands of locals and overseas visitors. The store features iconic elements from Old Navy’s U.S. flagship and such interactive features as touch-screen video games and game tables.
“We plan to open a total of five stores in China in fiscal 2014, starting with the Shanghai store,” said Robert Frank, Old Navy’s executive VP international. “With our China entry, continued growth in Canada and Japan and the launch of our franchise business in the Philippines next month, we are well positioned to grow our share of the global retail apparel market.”
The entry into the Chinese market follows Old Navy’s successful launch in Japan in 2012. Old Navy plans to open about 25 additional stores this year in Japan, bringing the total number of stores in the country to approximately 43 by the end of 2014.
Wide ranging chemical policy revealed by Walmart
Walmart’s release of a sustainable chemistry implementation guide may not sound like the biggest news to come out of Bentonville, but the directives contained in the document are sure to have wide-ranging implications for suppliers’ products.
Don’t take our word for it. Weighing in on the topic following release of the document were Jennifer McPartland, PhD, a health scientist with the Environmental Defense Fund, and Boma Brown-West, a manager for consumer health with the organization. Here’s what they had to say about the guide and EDF’s involvement.
Walmart unveiled its sustainable chemicals policy implementation guide. The guide details how the company will work with suppliers to bring safer products to millions of American shoppers, as announced last September when the policy was introduced.
Walmart’s chemicals policy affects formulated consumable products — the non-food products that you can pour, squeeze, dab or otherwise apply to your body or use in and around your home or car, from health and beauty aids to baby products to pet supplies. There are three main components of the policy: transparency through expanded ingredient disclosure; advancement of safer product formulation through the reduction, restriction, and elimination of priority chemicals and use of safer substitution practices; and a plan to take Walmart private brand consumables through the U.S. EPA Design for Environment (DfE) Safer Product Labeling Program — a rigorous product certification program that reviews the safety of product ingredients. Walmart’s policy is audacious in that it attempts to evolve from the common restricted substance list (RSL) approach to one that actively promotes usage of safer chemicals. The release of the Implementation guide makes public how this is expected to happen.
At EDF, we’ve been working to ensure that Walmart’s commitment will transform business as usual and spur continuous innovation in safer products.
The implementation guide provides direction and resources for suppliers as they work to meet the Walmart policy. In addition, Walmart explicitly details to suppliers and the public how it is going to measure its progress over time. A major take-away: the guide links quantifiable metrics to each component of the policy. It’s clear that Walmart’s policy was a data-driven process and its implementation will be similarly data-driven and supported.
Based on our knowledge of the Implementation guide, here’s an overview of what we at EDF think are the key things to know with respect to Walmart’s proposed implementation of the three main components of the policy.
Transparency: Online ingredient disclosure at the product level
The guide recommends existing guidelines, namely those of EPA’s DfE program and the Consumer Product Specialty Association, as a minimum for meeting online ingredient disclosure expectations, but acknowledges that “best-in-class” disclosure practices go further by including additional elements (e.g., disclosure of specific fragrance ingredients and known contaminants).
Walmart will track the percentage of each supplier’s products featuring online ingredient disclosure.
Online ingredient disclosure is to be achieved by Jan. 2015.
Advancing Safer Formulation of Products: Reduce, restrict, and eliminate the use of priority chemicals using informed substitution
Walmart is explicit in its expectation that all suppliers practice informed substitution when moving out of priority chemicals. The Guide calls out the multi-stakeholder Commons Principles of Alternatives Assessment as a guidepost and provides a list of tools and databases to help suppliers make informed decisions and avoid “regrettable substitutions.”
Progress is to be measured by reductions in the volume of priority chemicals and the number of products containing them, improvements in product scores for chemical safety, as measured by the GreenWERCS tool and number of products formulated exclusively with DfE ingredients. (It should be noted that DfE certification involves more than just assessment of product ingredients. See here to learn more about the program.)
No deadlines or specific goals are specified; however, Walmart plans to begin publicly reporting progress on this front in January 2016.
Design for the Environment (DfE) Safer Product Labeling Program Certification for Private Brands
The Guide reiterates from the policy that Walmart intends to run its private brand products—sold under such monikers as “Great Value” and “Equate”—through the U.S. EPA’s DfE Safer Product Labeling Program.
Walmart will measure the percentage of private brand products that contain DfE-approved ingredients and those that achieve the DfE label.
Again, no deadlines or goals are specified, but work has already begun and Walmart mentions its plans to publicly report progress related to this beginning in January 2016.
The guide includes the authoritative and regulatory lists used to identify “priority chemicals“ and clarifies that a subset of “approximately 10” so-called “high priority chemicals” [we added italics] are a starting point for suppliers. Interestingly, the Guide states that Walmart will be tracking reduction, restriction, and elimination of all of its “priority” chemicals.
The guide indicates that Walmart suppliers will be receiving an “initial one-time communication via email” this month from the retailer’s third-party software partner, the Wercs, notifying companies of whether and which high priority chemicals are present in individual products. It appears that communication is conducted through the Wercs so that specific product formulation information remains confidential and unknown to Walmart. While suppliers will learn if priority chemicals are in their products, the full initial list has not been made publicly available.
Walmart’s implementation guide puts real meat on the bones of its chemicals policy. And, as long as we’re using catch phrases, Walmart is putting real skin in the game by 1) making the guide public, 2) holding its private label products to higher expectations than the national brands, and 3) planning to report progress on policy implementation beginning in January 2016. Walmart’s guide reinforces that the company is not just talking about eliminating harmful chemicals — it means to ensure substitutions are better and that there are real systems in place to continuously work towards that goal.
At EDF, we will continue to closely monitor and verify the reduction of hazardous chemicals and shift to safer ingredients, working to ensure the promise for safer products becomes a reality. And we will be closely watching whether the commitment and expectations described here are met in a timely manner.