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Gap Sees 61% Profit Increase: Comeback Accomplished?

According to recent quarterly reports Gap's recent turnaround efforts seem to have paid off. Big time.
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Back in December, following an Ad Age cover story heralding the brand's recent successes, we wondered if Gap had finally started to make that comeback it's been attempting for years.

Following that story, the brand had a brief stock decline, then returned to the spotlight with announcements that Gap had acquired contemporary specialty retailer Intermix for a cool $130 million, including hints that it may not stop there.

Today, WWD reports that all of Gap's recent turnaround efforts have paid off with profits up a whopping 61% to $351 million based on fourth quarter results. Shares rose 1.3% and then an additional 2.2%, to $33.65, after earnings were reported. Net sales for the period rose 10.3 percent to $4.73 billion from $4.28 billion.

For the year, net income rose 36.3 percent to $1.14 billion.

As for the company's individual stores, all three--Gap, Banana Republic, and Old Navy--posted increasing sales for all four quarters.

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Regarding its recent acquisition of Intermix, CEO Glenn Murphy doesn't seem to have any buyer's remorse: “We love that business," he told the trade. "There are a lot of talented people at Intermix. We are going to help them when it comes to the integration strategy [and] we feel better about the decision we made today than six weeks ago.”

Murphy also said the company's recent success can be attributed to product that is "absolutely right on [for] what the brands stand for."

As for growth, Asia, unsurprisingly, appears to be a big potential market. There are plans to open 35 more Gap stores in China this year, as well as 20 Old Navy stores in Japan.

Murphy also stressed the importance of giving the customer "reasons to buy" through new product lines and campaigns. He also has "some really good ideas that will be launched in 2013, which we will talk about down the road."

Gap finally seems to be back on track--both financially and in terms of branding. When it comes to product, it's been a while since I've been inside a Banana Republic or Old Navy, but Hayley has a really cute sweatshirt from the latter and Banana's Mad Men collection is back for another go, which seems like a good sign. As for Gap, I've been increasingly impressed with its offerings--it has some really cute stuff for spring, including this adorable cat print I'm obsessed with (even if some of it does look a teensy bit familiar).