Gap has exceeded Wall Street’s expectations for the second quarter, as an early announcement revealed that shoppers flocked to its Old Navy and Gap brands for trendy, fashionable clothing.
Gap’s shares closed nearly 2 per cent higher, though trading was briefly halted after a Bloomberg News report noted that the retailer’s earnings release appeared on its website ahead of schedule. A Gap spokesperson later clarified that the early posting was due to an administrative error; the results were initially set for release after the market closed.
Under CEO Richard Dickson, Gap is in the midst of a brand turnaround, revitalizing its stores with updated, stylish offerings to recapture lost customers. Dickson mentioned that the brand’s consumer base is expanding, with more sales at full price and less reliance on discounts.
Despite a broader trend of consumers tightening their spending on major purchases, there is strong demand for on-trend apparel and footwear from brands like Abercrombie & Fitch, Roger Federer-backed On, and Deckers Outdoor’s Hoka.
Morningstar analyst David Swartz commented that while not all of Gap’s brands are fully healthy, they are showing positive trends under the new management.
Old Navy saw a 5 per cent increase in comparable sales, and Gap brand sales rose by 3 per cent for the quarter. However, Banana Republic’s sales were flat as the brand works on improving its fundamentals, pricing, and assortment.
Gap’s net sales for the second quarter rose 5 per cent to US $ 3.72 billion, surpassing LSEG estimates of US $ 3.63 billion. Gap also maintained its annual sales forecast and projected a gross margin increase of approximately 200 basis points, up from its previous estimate of at least a 150-basis-point rise.
