Gap reports tough Q4, rejigs leadership team
Fourth quarter net sales at Gap, Inc. of 4.24 billion dollars, were down 6 percent compared to last year, and comparable sales were down 5 percent.
The company’s store sales decreased 3 percent compared to last year, while online sales decreased 10 percent and represented 41 percent of total net sales.
For the full year, the company’s net sales of 15.6 billion dollars, were down 6 percent, while comparable sales were down 7 percent. Store sales decreased 6 percent, while online sales decreased 7 percent and represented 38% of total net sales.
The company also announced several exits from its executive leadership team, which includes Mary Beth Laughton, president and CEO of Athleta business.
“To enter fiscal 2023 in a more competitive position, we took quick and effective action to clear excess inventory, improve assortment balance, particularly at Old Navy, and to meaningfully optimise our cost structure, resulting in 550 million dollars in annualised savings identified to date,” said Bob Martin, Gap Inc. executive chairman and interim CEO.
Gap Q4 sales decline across brand portfolio
Gross margin for the quarter was 33.6 percent, deleveraging 10 basis points versus last year, while operating loss was 30 million dollars; and operating margin negative 0.7 percent. The company reported a net loss of 273 million dollars; and diluted loss per share of 75 cents.
Fourth quarter net sales of 2.2 billion dollars were down 6 percent at Old Navy, while comparable sales were down 7 percent driven by demand softness from the lower-income consumer and in the kids and baby category partially offset by strength in the women’s category. The company believes that Old Navy’s strategy to pull forward sales from the fourth quarter to October also impacted growth in the quarter.
Gap brand net sales of 1.1 billion dollars were down 9 percent compared to last year and comparable sales were down 4 percent. North America comparable sales were down 5 percent in the fourth quarter. The shutdown of Yeezy Gap negatively impacted growth in North America by approximately 2 percentage points. Performance was driven by softness in the kids and baby category offset by strength in the women’s category.
Net sales at Banana Republic of 578 million dollars were down 6 percent and comparable sales were down 3 percent driven by softness in outerwear and sweaters as well as its holiday gifting assortment.
Athleta net sales of 436 million dollars were down 1 percent and comparable sales were down 5 percent driven by continued product acceptance challenges.
Gap reports loss in FY22
Gap said, reported gross margin for the full year was 34.3 percent; and adjusted gross margin, excluding 111 million dollars in impairment charges primarily related to inventory, was 35 percent, deleveraging 480 basis points versus last year.
Reported operating loss was 69 million dollars; while reported operating margin was negative 0.4 percent. Adjusted operating loss was 6 million dollars. Reported net loss was 202 million dollars; while reported diluted loss per share was 55 cents. Adjusted net loss was 145 million dollars, while adjusted diluted loss per share of 40 cents.
Gap announces actions to optimise operating structure, executive changes
The company announced today actions to further simplify and optimise its operating model and structure, which are estimated to result in 300 million dollars in annualised savings, of which roughly half is expected to be realised in the back half of fiscal 2023. As a result, the company is eliminating the role of chief growth officer held by Asheesh Saksena.
The company also announced that Mary Beth Laughton, president and CEO of Athleta is exiting the business.
“We believe Athleta has incredible potential, but it has suffered from product acceptance challenges over the past several quarters. As we look to capitalise on this potential and remain competitive amidst a dynamic landscape, we believe now is the right time to bring in a new leader who can position Athleta for long-term success,” Martin added
Additionally, Sheila Peters, chief people officer, will leave the company at the end of the year.
Gap expects FY23 net sales to decrease mid-single digit
The company is estimating first quarter net sales could decrease in the mid-single digit range compared to last year’s net sales of 3.5 billion dollars. The sale of Gap China to Baozun closed on January 31, 2023. First quarter 2022 net sales included approximately 60 million dollars in sales for Gap China.
The company anticipates that fiscal 2023 net sales could decrease in the low to mid-single digit range compared to last year’s net sales of 15.6 billion dollars. Fiscal 2022 net sales included approximately 300 million dollars in sales for Gap China. Fiscal 2023 will include a 53rd week estimated to positively impact net sales by 150 million dollars.
The company expects first quarter and fiscal 2023 gross margin expansion compared to the prior year.