Gap Inc. shares tumbled after the retailer reported quarterly sales that missed Wall Street’s estimates, an indication that it struggled to attract shoppers during the holiday season despite deep discounts.
(Bloomberg) — Gap Inc. shares tumbled after the retailer reported quarterly sales that missed Wall Street’s estimates, an indication that it struggled to attract shoppers during the holiday season despite deep discounts.
Comparable sales, a key gauge for retailers, fell 5% in the fourth quarter ended Jan. 28, compared with analysts’ average estimate of a 2.7% decline. Gap expects the revenue decline to continue this year.
The stock slid as much as 10% in New York trading on Friday, the biggest intraday decline since May 27.
Comparable sales declined at all four of the company’s main brands: Gap, Banana Republic, Athleta and Old Navy. The latter has historically been a growth driver for the company but has struggled lately. The company noted weakness in the kids and baby category at both Gap and Old Navy, and said that the shutdown of Yeezy Gap, the company’s partnership with rapper Ye, contributed to the sales drop.
Profitability also took a hit. Gross margin was 33.6%, down from the prior quarter due to heavy discounting during the holiday season.
Gap has been looking for a new CEO since July, when Sonia Syngal was ousted as the company struggled to manage inventory.
What Bloomberg Intelligence Says
“Having cut inventories 21%, Gap is well positioned with fresh product — particularly at Old Navy — that’s driving 1Q trends better than 4Q at a higher gross margin (vs. 1Q22). With the biggest shopping days of the quarter still to go and weakness in lower-income cohorts, management sees 1Q and 2023 sales down.”
— Mary Ross Gilbert, senior retail analyst
Click here to read the research.
The San Francisco-based company announced several executive changes in its earnings report, with the CEO of the Athleta brand departing and the position of chief growth officer eliminated. These changes, in addition to an effort to “optimize” the organizational structure, are expected to result in $300 million in annualized savings, Gap said.
Analysts aren’t convinced the company’s moves are going to pay off anytime soon.
“The stock likely remains range-bound until new initiatives show up in the [profit-and-loss statement], which may take some time, if ever successful,” Morgan Stanley analyst Alex Straton wrote in a research note.
(Updates with shares in third paragraph.)
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