Banana Republic 2006 Annual Report Download - page 11

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Letter to Shareholders 9
Implicit in all three is the need to improve our financial performance and
deliver an acceptable return to you, our shareholders.
Gap and Old Navy
Our first priority is to fix our core business. We must rebuild Gap and
Old Navy and return them to premiere positions in the marketplace. We
need to do a better job of identifying the target customer and delivering
the right product.
At Gap, we have a clear sense of our BabyGap, GapKids and GapBody
customers and we’ve seen positive momentum in these businesses
because we are delivering the right product in store environments that
speak distinctly to them. But at Gap adult we’ve defined our target
customer too broadly and that, in part, is what hurt our performance
in 2006. Today’s specialty retailers have a much narrower focus, and
consumers are exposed to more selective, niche marketing. Moving
forward, we are committed to establishing a clear point of view for the
brand. We will communicate more consistently based on Gap’s iconic
casual heritage.
We believe the primary challenge at Old Navy is somewhat different.
While we’re still assessing, we know we must develop great product
with enticing marketing, pricing and inventory strategies and act on them
decisively. Old Navy operates in one of our most competitive markets,
and we cannot be as tentative as we became in the past two years.
Moving forward, we will stand strong behind key product trends each
season, and back our big ideas with the right inventory investments,
visual merchandising and all elements of marketing. It is these kinds
of well-executed ideas that helped Old Navy become the first retailer to
hit $1 billion in less than 4 years. There is still great potential in Old Navy,
and I believe we can re-capture the unique retail experience that we
broke ground with more than 13 years ago.
In short, the simple fact is that we need to know our customer and then
give them the right product in appealing store environments. We know
that when we align these factors, we drive results. We’ve done it before;