Dive Brief:

• Gap reported a Q4 12.5% decline in profits and a 3% decline in revenue that the retailer attributed to heavy holiday season discounting, but beat analysts’ expectations nevertheless.

• Online sales seems to be where it’s at for the San Francisco-based retailer, with a 21.5% increase in web sales in fiscal 2013 and 3.2% increase in total sales.

• In the coming fiscal year, Gap said its plans include 185 new stores, many in China, and many of them Old Navy Japan, outlet stores worldwide, and an expansion of its Athleta activewear brand, which also has stand-alone stores.

Dive Insight:

Gap has been making noticeable progress in marketing, m-commerce, e-commerce, and in its merchandise. With the help of Danish Branding expert Rebekka Bay who came aboard last year, its clothes are now impressing fashion observers. Gap’s Athleta brand is also well positioned to surf the current wave of consumer love for activewear. And while web sales increased substantially in 2013, Gap CEO Glenn Murphy believes shoppers want to visit physical stores, and says the company is maximizing mobile and the web to get customers into stores.

Even Gap's minimum wage hike could be a long-term profits strategy: While many assume the move will cost the company money, cutting edge thought among some retail experts is that higher wages lead to larger profits. In any case, Murphy said in the company’s conference call Thursday that the retailer would like to offer its customers something new and different — something beyond discounts —​ succinctly describing the retail challenge of the moment.