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Gap (GPS) Reports Fiscal 2nd Quarter 2022 Results

Gap (GPS) Reports Fiscal 2nd Quarter 2022 Results
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An employee hands a shopping bag to a customer at an Old Navy store in San Francisco.

David Pablo Morris | Mayor Bloomberg | fake images

gap inc on Thursday withdrew its financial outlook for the year after it posted a net loss in the fiscal second quarter and its Old Navy chain continued to struggle with the wrong mix of sizes and styles.

The San Francisco-based company, which is in the midst of searching for a new CEOcited its recent execution challenges and uncertain macroeconomic trends to withdraw its 2022 guidance. Decades-high inflation is hurting low-income consumers who are among the biggest customers of some of the company’s brands.

“In the near term, we are taking steps to sequentially reduce inventory, rebalance our assortments to better meet changing consumer needs, aggressively manage and reassess investments, and strengthen our balance sheet,” CFO Katrina O’Connell said in a news release. . liberation liberation

For the three-month period ended July 30, the retailer reported a net loss of $49 million, or 13 cents per share. A year earlier, he reported net income of $258 million, or 67 cents per share.

Excluding one-time items, the company earned 8 cents per share.

Gap’s revenue for the period fell 8% to $3.86 billion from $4.2 billion a year earlier. That topped estimates of $3.82 billion, according to a Refinitiv survey. Gap shares rose 7% in extended trading.

Online sales fell 6%, representing 34% of total sales.

Like-for-like sales, which track revenue online and at stores open for at least 12 months, were down 10% from a year earlier. That included a 15% decline at Old Navy, which the company said was affected by inventory delays, “product acceptance issues” in key categories and slower demand among low-income shoppers.

At the company’s namesake Gap brand, global comparable sales fell 7%, in part due to ongoing and planned store closures.

Comparable sales at Athleta fell 8% and the company saw a shift in consumer preference from athletic to work-based categories. At Banana Republic, comparable sales increased 8%, which the retailer attributed to its investments in quality and changing consumer trends.

Gap said in prepared remarks that it began to see improving sales trends in July and August coinciding with a drop in gasoline prices. However, the company is not offering a forecast for its full fiscal year due to ongoing uncertainty about consumer behavior and promotions at other retailers.

The company ended the last quarter with inventory of $3.1 billion, up 37% from a year earlier. Some of this was intentionally saved for sale in another season, and some is still in transit, Gap said.

As part of its cost-cutting efforts, the company said it has reduced the number of new Old Navy stores it planned to open in the second half of the year.

“While our elevated inventory and pressured margins are current realities in the face of unstable market conditions, they do not define our ability to capitalize on Gap Inc.’s strengths to win,” said Gap interim CEO Bob Martin, who is also chairman. executive.

gaps Former CEO Sonia Syngal resigned from his role abruptly in July. The company also recently named a new leader for its Old Navy division.

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