Gap's COVID pivot with face masks adds $130m in sales

Yahoo Finance’s On the Move panel discuss retail earning and the latest in store bankruptcy’s.

Video Transcript

JULIE HYMAN: In addition to people buying personal computers, apparently, not surprisingly, they were buying a lot of face masks during last quarter. But what's maybe surprising is where they were getting them from. We talked about the big boom at Etsy, for example, in face masks.

But Gap reported its earnings. Turns out it sold $130 million worth of face masks during the quarter. Its total sales were down 18%, but online sales pretty much doubled.

So interesting phenomenon here as we had them becoming one of the major suppliers of masks. Who-- who wants to weigh in first on this Gap situation? I see Dan smiling here, so I'm going to go to you first, Dan.

DAN ROBERTS: Well, it's just interesting, right? You know, we know that the Gap has been, in some ways, people thought left for dead. I'm sure our colleague Brian Sozzi has some thoughts here. But in many ways, I think a lot of retailers have surprised during the pandemic, right? By the way, it's still losing on EPS.

But a lot of these retailers that I've been covering this closely, it's huge online sales surges we're seeing, and that shouldn't be surprising. But I also think people are short-sighted to just chalk that up to the pandemic. I think this is clearly the new normal.

I mean, the numbers for the percentage online sales surges that we've seen from Walmart, Target, Best Buy, Urban Outfitters, Dick's. Best Buy up, like, 240% online sales in Q2. It's very clear where everything is headed. So if retailers like the Gap can figure that out, good. Maybe they can survive.

JARED BLIKRE: Yeah, I just want to check out the market action. We have a heat map on the Y Fi interactive of apparel going back five days, and tailored brands mired in bankruptcy, not surprising they're outperforming, perhaps. But Urban Outfitters up 25%. Gap up 20%. Abercrombie & Fitch, that's up 20%-- excuse me-- 16%. That's all in the last five days.

And then you take a look over the last five months, and we see a lot of stands out. Even L Brands is up 135%. But of course, a lot of these stocks were those that had gotten beaten down the most. And so you check out year-to-date, a number are still under water here. In fact, the only three outperforming for the year, Nike, Lululemon, that's up 63%, and then L Brands up 64%.

JULIE HYMAN: And I want to bring in Brian Sozzi on this as well, anchor on The First Trade, because there's sort of a common theme with a lot of these. First of all, they're casual, right? And as we know, a lot of people who are at home are not dressing up while they're at home, or at least not that much, us notwithstanding.

You know, and a lot of them also are aimed at younger consumers, although the Gap, you would say, is not necessarily in that category. Then you have Lord & Taylor, which it says now is liquidating, couldn't find a buyer. Lord & Taylor probably skews a little older and probably a little more formal. What do you make of all this?

BRIAN SOZZI: Well, there's definitely, Julie, a rush to casualize a lot of specialty retailers. You know, I talked a good bit about this with Abercrombie's CEO Fran Horowitz yesterday. You'll see a lot more casual trend-- trends from them heading into the fall.

But I do want to debunk this notion that suddenly Gap is this magical growth retailer. Wall Street has been all over this stock ever since Kanye signed on. It's absolutely absurd. Sales fell-- the bottom dropped out of sales for Gap and Banana Republic in the most recent quarter.

Old Navy wasn't that hot. Essentially, Wall Street is bullish on this company because they might sell Athleta. That'd be great. But this is still a zombie retailer in the mall. When was the last time Dan Roberts went to Gap? I would imagine maybe what, 20 years ago?

DAN ROBERTS: Exactly right, although I am an apologist for J. Crew. I still-- I still think J. Crew is nice, although I know J. Crew is also likely dead. But that's fair about the Gap. I don't think they've really updated the brand in ages.

JULIE HYMAN: I'm the one. I'm the one who keeps going.

BRIAN SOZZI: No, you're not. Come on, Julie.

JULIE HYMAN: I like their kids stuff, and I do like their basics, I have to say. And GapFit ain't bad either, and Athleta. OK.