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Gap turns off TV ads

Gap is dropping TV advertising as part of a number of initiatives it is implementing to manage costs and improve profitability at the group’s brands.

Gap presented investors with an update on the company’s strategies for improving business for its core brands Gap, Old Navy and Banana Republic.

Chairman and chief executive Glenn Murphy said the business remained focused on improving results at core brands, while pursuing growth opportunities online and internationally.

He said: “With Gap’s strong balance sheet, we’re in a solid position to succeed in the long term and we have the flexibility to respond to the current economic environment.”

The company said that the recent focus on stock control and cost management had helped the company achieve a 65% growth in earnings per share in the first half of 2008.
Gap said it was reaffirming financial guidance for the year and said it expected diluted earnings per share to be between US$1.30 (76p) and US$1.35 (79p) for the year.
It expected operating margins would be about 10% with around US$1 billion (£588m) in cash flow for 2008.

Gap’s North America president Marka Hansen said the Gap chain was focusing on “bringing customers back into stores” but would drop its use of television advertising for the financial year, previously a strong promotional tool for the brand, to use traditional and non-traditional tactics. This includes a “vote for” campaign based around the US elections, which includes a customisable T-shirt.

The priorities at its Old Navy business are to improve the product mix, drive traffic, improve value, and roll out its new store design, according to the company.

Gap’s Banana Republic fascia opened its first store in the UK earlier this year, and the company anticipates further growth opportunities in Europe.

Toby Lenk, president of online division Gap Direct, said he expected web sales to surpass the US$1bn (£588m) threshold this year. Net online sales were US$595m (£350m) in 2005 and grew to US$903m (£532) in 2007.

Gap will release its third quarter earnings results on November 20.

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