Gap’s Katseye campaign generated 20 million views in 3 days as denim drives its turnaround
Gap Inc. appears to have honed in on a playbook to drive continued sales growth at its most important brands.
That playbook, according to CEO Richard Dickson, is about building stronger brand identities through “trend-right products that are amplified with more compelling storytelling,” with the goal of making its brands a bigger part of the cultural conversation.
Its recent campaign with the global girl group Katseye is living proof of this: Gap’s latest campaign, called “Better in Denim,” features the members of Katseye dancing to the 2000s hit “Milkshake” by Kelis, and is meant to celebrate the return of low-rise jeans.
On Gap’s second-quarter earnings call on Thursday, Dickson said the Katseye campaign generated 20 million views in its first three days, “more views than the full length of our last four releases combined.” Early reads on the campaign, he said, indicate that “this is [within] striking range of probably being one of the most iconic brand campaigns that we’ve done.”
As a result, Gap Inc. continues to post solid sales results even amid a tough retail environment, and as one of its other brands falters. During the second quarter, net sales were flat compared to last year — but comp sales at Old Navy, its largest brand, were up 2%. And comparable sales at its marquee Gap brand were up 4% year-over-year, marking the seventh consecutive quarter of comp sales growth. These are some of the major proof points that Dickson used to argue that “our strategy is working.” Banana Republic is also growing, with comp sales up 4% year-over-year.
Still, Gap Inc. is up against a tough retail environment, exacerbated by tariffs and mixed signals on consumer demand. Gap also still has work to do in turning around its activewear brand, Athleta, where comp sales were down 9% year-over-year during the second quarter.
In earnings calls, Dickson has highlighted the moves Gap has made to operate with more financial rigor. They include restructuring its fixed cost base and modernizing its media mix model, among other initiatives.
But it is changes on the merchandising and marketing front that are fueling the comp sales growth and driving more cultural buzz. Denim, in particular, is a bright spot for both Old Navy and Gap. Dickson said that, during the second quarter, Old Navy’s denim business “posted the highest volume second quarter in 10 years.”
Old Navy has been focused on “leaning into the denim category with conviction.” Dickson said, by highlighting its collections in stores through dedicated denim shops, and leaning into on-trend baggy and wide-leg fits. He said the “momentum has extended into the third quarter, with early back-to-school denim performing very well.”
Similarly, Dickson said, Gap’s “strategic pursuit of denim continues to propel the brand with more pronounced fashion and trend-right products.” He said sales during the quarter were driven by demand for baggy, horseshoe, barrel and easy pull-on styles.
Jessica Ramirez, co-founder and managing director of the Consumer Collective, said that both Gap and Old Navy have also started doing a better job of merchandising products online; she said she’s seeing video being utilized more and the brand showing off different ways that items can be paired with different outfits. “I think there’s this assumption that women know how to dress,” Ramirez said, when actually, what many customers want is more guidance. “It makes it easier for someone to imagine how that outfit is going to look.”
Still, she said, there’s more work to be done on improving merchandising in stores.
And, with four brands to juggle, Gap still faces a challenging road in delivering more growth to investors. The company is forecasting that net sales will be up 1.5- 2.5% during the third quarter.” Still, Dickinson’s message during the earnings call was that Gap’s strategy is working.
“Our playbook continues to deliver, strengthening the foundation of our brands and proving they can matter more,” he said.