Executives at clothing retailer the Gap say they plan to keep inventories more lean in the coming year and use a “fast pipeline” to respond to demand after seeing net profit fall back by a third on reduced sales in the company’s fiscal third quarter.
“What we want to do is never get too far ahead of demand in terms of inventory,” Chief Financial Officer Sabrina L. Simmons told investment analysts after the Gap released its report on the quarter ending Oct. 29.
“That's why we put a lot of focus on our fast pipeline and enhancing our ability to chase,” she said.
The parent of the Gap, Old Navy, Banana Republic and other brands was chasing sales with too much inventory in its last quarter before the holiday rush.
Revenue at its stores declined 2 percent to $3.59 billion, and the net profit fell from $303 million last year to $193 in the most recent quarter. Merchandise inventories were up 7.5 percent at the end of the quarter over October 2010 inventories and officials said inventory value per store was up 6 percent.
Simmons said inventories will likely remain high heading into the holidays but she suggested the Gap will look to be more nimble in 2012.
“We feel like as we move into 2012, our assortments are improving, and as that momentum improves we're going to initially buy fairly tightly then use that ability to chase and use our fast pipeline to increase the inventory,” she said.