Gap (GPS) Reports Second Quarter Fiscal 2022 Results

An employee hands a shopping bag to a customer at an Old Navy store in San Francisco.

David Paul Morris | Bloomberg | Getty Images

Gap inc. Thursday withdrew its financial outlook for the year after posting 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 finding a new CEOcited its recent execution challenges and uncertain macro trends to withdraw its 2022 forecast. Decades-high inflation is hurting low-income consumers who are among the top 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,” said Chief Financial Officer Katrina O’ Connell in a statement. Release.

For the three months ended July 30, the retailer reported a net loss of $49 million, or 13 cents per share. A year earlier, it 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 by $3.82 billion, according to a Refinitiv survey. Gap shares rose 7% in extended trading.

Online sales fell 6%, accounting for 34% of total sales.

Comparable sales, which track revenue online and in stores open for at least 12 months, were down 10% from a year ago. This included a 15% decline at Old Navy, which the company said was hit by inventory delays, “product acceptance issues” in key categories and slowing demand among shoppers at low income.

In the company’s eponymous banner, Gap, global comparable sales fell 7%, in part due to ongoing and planned store closures.

Athleta’s comparable sales were down 8% as the company noted a shift in consumer preference from athleisure categories to professional 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 it began to see improving sales trends in July and August, coinciding with lower gasoline prices. However, the company is not offering a forecast for its full fiscal year due to continued uncertainty regarding 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 was intentionally packaged to be sold 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 plans to open in the second half of the year.

“While our high inventories and squeezed margins are current realities in the face of volatile market conditions, they do not define our ability to capitalize on Gap Inc.’s strengths to win,” Gap’s interim CEO said. , Bob Martin, who is also Executive Chairman.

Difference former CEO Sonia Syngal resigned from his role abruptly in July. The company also recently named a new chief for its Old Navy division.

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