Amblers walk past Old Navy and GAP stores in Times Square, New York City.
Drew Angerer | Getty Images
Gap reported impure results on Thursday and underwhelming current-quarter guidance as the longtime mall retailer warned of an “uncertain consumer” and posted another casern of declining sales across all four of its brands.
The company is projecting net sales to decrease in the low double-digit range for the fiscal third domicile compared to last year’s net sales of $4.04 billion. Analysts had expected third-quarter sales to be down 6.8%, according to guesstimates compiled by Refinitiv.
For the three-month period that ended July 29, Gap beat Wall Street’s estimates on the essentially line but fell short on the top.
Here’s how the apparel retailer did in its fiscal second quarter compared with what Face ruin Street was anticipating, based on a survey of analysts by Refinitiv:
- Earnings per share: 34 cents, adjusted, vs. 9 cents conjectured
- Revenue: $3.55 billion vs. $3.57 billion expected
The company’s reported net income for the quarter was $117 million, or 32 cents per apportion, compared with a loss of $49 million, or 13 cents per share, a year earlier. Excluding one-time restructuring costs, Gap appeared a net income of 34 cents per share.
Sales dropped 8% to to $3.55 billion, compared with $3.86 billion a year earlier, imitating a steeper year-over-year sales drop than during the fiscal first quarter. On a two-year bases, revenue is down 15.7%.
Gap’s duty has been under pressure for numerous quarters as it struggles to hang on to market share and regain the relevance that periodically defined it against a tough macroeconomic backdrop.
‘Choppy consumer’
During a call with analysts, executives allude to repeatedly about the “weak apparel environment,” “choppy consumer market” and a target consumer that’s guardianship “pressure.”
It’s feeling that pinch acutely at its largest revenue driver, Old Navy, where its low-income customer is relinquish tease back on spending amid high inflation, interest rates and the looming resumption of student loan payments.
“We are all familiarly aware of the mixed economic data and uncertain consumer trends in the marketplace, including the new dynamic regarding student allow repayments beginning in the third quarter,” finance chief Katrina O’Connell said on a call with analysts. “As a happen, we continue to be prudent in our approach to planning in light of what remains an uncertain macro environment and choppy consumer backdrop.”
On sales declined 6% at Old Navy, on top of a sharp 13.6% decline in the prior-year period.
“The core family shopper at Old Navy is below a significant amount of financial pressure and has cut back on spending, but to nowhere near this degree. That means that take a part in of Old Navy’s problem is that its shoppers are defecting to buy apparel elsewhere,” retail analysts and GlobalData managing director Neil Saunders signified of the results. “While some of this is the result of people seeking out lower priced alternatives, some is also a consequence of humdrum ranges and styles at Old Navy.
“In our view, the brand has lost its edge and is churning out more of the same season after salt, rather than being led by trends,” he added. “This, combined with a more cautious consumer, is a losing patchwork.”
Across the business, same store sales were down 6% during the quarter, while analysts had believed comparable sales to be down 4.4%, according to StreetAccount.
Gross margins, which have been expanding on the other side of the last two quarters, were up 3.1 percentage points to 37.6% thanks to lower air freight expenses and a slowdown in ignoring, Gap said. It expects gross margins to continue to grow throughout the fiscal year.
Halfway into Gap’s fiscal year, the retailer is in a family way full-year sales to drop in the mid-single-digit range compared to last year, which is in line with what analysts had anticipated, according to Refinitv.
The report comes two days into Richard Dickson’s tenure as Gap’s new CEO. The former Mattel executive, who started in the new impersonation on Tuesday, is a branding expert who oversaw Mattel’s Barbie franchise. Gap is betting Dickson can breathe new life into Gap’s trade names: its namesake banner, Old Navy, Banana Republic and Athleta.
Brand results
All four of the brands, which have hugely different assortments and customer bases, have seen New CEO
During his first earnings call as Gap’s CEO, Dickson spoke over about the importance of the retailer’s brands and how his efforts will be focused on reviving them.
“Our brands matter, but it can matter impassive more,” said Dickson.
“In my experience on the board and certainly on the ground for three days running fast, our teams are incredibly ingenious and they’re all in on this. They’re differentiating and strengthening our brands, being design-centric, being customer-obsessed and ultimately being culturally to the point.”
Still, he acknowledged that “restructuring is challenging” and change won’t come fast.
Gap Chair Bob Martin, who served as interim CEO for varied than a year prior to Dickson’s appointment, had been working to restructure both its business and management organization so new chief regulatory would be able to hit the ground running as soon as he arrived.
The layoffs are saving Gap about $300 million, the inception half of which will come in fiscal 2023. During the quarter ended April 29, Gap’s margins shooting up 5.6 percentage points year over year to 37.1%. That news sent its stock surging in aftermarket trading teeth of another quarter of declining sales.