Thursday saw Gap shares tanking after apparel retailer released reports of sales and quarterly earnings falling short of Wall Street estimates and slashed profit outlook of the whole year. Gap shares fell over 10% during after-hours trading and closed at $20.60 per share, a fresh low since June 2016. Art Peck, the CEO, stated how the recent quarter experienced severely slow business in February and placed blame on one of the ‘wettest, coldest quarters’ for poor results. Gap is struggling to get its items on par with what men and women are shopping for in recent times, especially with fast-fashion retail companies such as Zara churning new clothing styles in stores every week with leaner supply chains.
Compared to expectations of analysts, Gap reported fiscal Q1 as the following- earnings per share were reported to be 24 cents as compared with expectations of 32 cents while excluding one-time charges; revenues were recorded as $3.71bn as compared to expected $3.77bn; same-stores sales dipping 4% as compared to an expected 1.1% drop. During latest quarter, Gap earned 60 cents/share or $227m as compared to 42 cents/share or $164m one year ago. Sales were also seen to have fallen to $3.71bn from $3.78bn, as recorded a year earlier. Same-store sales at namesake brand of Gap fell 10% as compared to 4% one year ago. The same at Old Navy, usually the brightest Gap Inc. spot, dipped 1% as compared to 3% rise one year ago and that at banana republic fell 3% in comparison with 3% rise during 2018 same quarter.
San Francisco-based retailer reduced annual profit outlook, now expecting fall in earnings per share this year to be between $2.05 and $2.15, compared with earlier range of $2.40 to $2.55. It is also expecting company-wide same-store sales to fall in fiscal 2019. The company plans on closing 130 branded stores in fiscal Q4 and opening new ones under Old Navy, Athleta and Gap China banners.
Other apparel retailers like Abercrombie & Fitch and Canada Goose have also performed poorly this week. Gap’s deal to spin off Old Navy brand into an individual, separate public company, resulting in 20% surge in shares on 28th February, will not likely be completed until 2020.