Gap Q2 net sales down, cautious on FY16 outlook

Second quarter diluted earnings per share at Gap were 0.31 dollar on a reported basis. The company noted that foreign currency fluctuations negatively impacted the earnings by around 0.05 dollar. Net sales were 3.85 billion dollars compared with 3.90 billion dollars for the second quarter of fiscal year 2015.

“During the quarter, we took critical steps to execute our restructuring plans and to build a more efficient global brand model with greater potential for growth,” said Art Peck, CEO, Gap, adding, “While I remain unsatisfied with the pace of improvement across the business, I am encouraged by the underlying signs of progress in Q2, as demonstrated by healthier merchandise margins.”

Second quarter comparable sales decline 2 percent

Excluding the impact of restructuring plans, which was approximately 0.29 dollar, the company’s adjusted diluted earnings per share were 0.60 dollar for the second quarter of fiscal year 2016.

Gap’s comparable sales for the quarter were down 2 percent versus a 2 percent decrease last year that included 3 percent decline at Gap Global versus negative 6 percent last year, 9 percent decline at Banana Republic Global versus negative 4 percent last year and at flat comparable sales at Old Navy Global versus positive 3 percent last year.

Cuts full year earnings guidance

The company updated its reported diluted earnings per share guidance for fiscal year 2016 to be in the range of 1.37 dollars to 1.47 dollars. Excluding the negative impact of restructuring costs, which is expected to be approximately 0.45 dollar to 0.50 dollar, the company expects its adjusted diluted earnings per share to be in the range of 1.87 dollars to 1.92 dollars.

The company ended the second quarter with 3,730 store locations in 52 countries, of which 3,273 were company-operated. During the quarter, the company opened 19 and closed 22 company-operated stores. Gap continues to expect net closures of about 50 company-operated stores in fiscal year 2016.

Picture:Gap