Gap cuts forecast following 'extremely challenging' quarter

For the first quarter ended May 4, 2019, net sales at Gap Inc. were 3.7 billion dollars, a decrease of 2 percent compared with last year, while gross profit was 1.34 billion dollars, down 6 percent. Diluted earnings per share were 0.60 dollars on a reported basis.

“This quarter was extremely challenging, and we are not at all satisfied with our results. We are committed to improving our execution and performance this year,” Art Peck, president and chief executive officer at Gap Inc said in a statement. “We remain confident in our plan to separate into two independently traded public companies in 2020, and we are focused on setting up both companies for long term value creation and profitable growth.”

Gap’s comparable sales for the first quarter were down 4 percent compared with a 1 percent increase last year. Comparable sales at Gap Global were negative 10 percent versus negative 4 percent last year; at Banana Republic Global, negative 3 percent versus positive 3 percent last year; and at Old Navy Global, negative 1 percent versus positive 3 percent last year.

Gap brand restructuring continues with planned store closures

Gross margin was 36.3 percent, a decrease of 140 basis points compared with last year, while operating margin was 8.5 percent, an increase of 240 basis points compared with last year. Adjusted operating margin was 3.5 percent, a decrease of 260 basis points compared with last year.

The company said it now expects to close about 30 company-operated stores, net of openings and repositions in fiscal year 2019. “The updated guidance reflects about 10 additional store openings for both Old Navy and Athleta,” the company said in its quarterly report. “This guidance also includes about 130 closures related to the Gap brand fleet restructuring, the majority of which are expected to close in the fourth quarter of fiscal 2019.” The company expects store openings to be focused on Old Navy, Athleta and Gap China locations.

Photo credit: Gap, Facebook