Gap swings to a loss as sales drop 18%, says strong online sales softened the blow from closed stores

Gap Inc. mentioned Thursday its complete sales tumbled 18% throughout the newest quarter, as e-commerce income surged 95% from a yr in the past, however these positive factors had been offset by a 48% drop in retailer sales throughout the coronavirus pandemic

It swung to a internet loss from a yr in the past, as the decrease sales mixed with further transport bills for all of these online orders weighed on income. 

And trying to the the rest of the yr, the firm mentioned it expects sales traits to enhance from right here, fueled by its Old Navy and Athleta banners. It expects weak spot at Banana Republic, which is understood for ladies’s work put on, to stay. 

Its shares had been rising almost 1% in after-hours buying and selling. 

Here’s how Gap did throughout its fiscal second quarter in contrast with what analysts had been anticipating, primarily based on Refinitiv knowledge: 

  • Loss per share: 17 cents vs. a loss of 41 cents anticipated 
  • Revenue: $3.28 billion vs. $2.91 billion anticipated 

For the interval ended Aug. 1, Gap posted a loss of $62 million, or 17 cents per share, in contrast with internet revenue of $168 million, or 44 cents a share, a yr in the past. That got here in higher than the 41 cents per share loss forecast by analysts, primarily based on a Refinitiv ballot. 

Sales fell about 18% to $3.28 billion from $four billion a yr in the past, beating analyst expectations for $2.91 million. 

The retailer almost doubled its e-commerce enterprise throughout the quarter, Chief Executive Sonia Syngal mentioned, as clients stocked up on primary tees, exercise shorts and pajama units. Online sales represented 50% of complete sales. 

Same-store sales, which observe the sales online and at stores open for not less than 12 months, had been up 13%, the firm mentioned, pushed by the power of its online enterprise. The 13% determine solely accounts for the days that Gap stores had been bodily open for enterprise throughout the quarter, nonetheless. Gap mentioned it added 3.5 million new digital clients throughout the interval. 

The firm mentioned it introduced in $130 million in sales throughout the second quarter by making face masks, promoting these to each people and companies in bulk. 

Sales at its namesake Gap model had been down 28%, consisting of a 75% improve online and a 55% decline in stores. 

At Old Navy, which has been considered one of Gap’s strongest performing manufacturers of late, sales fell 5% total, consisting of 136% progress online and a 36% drop at stores. Gap mentioned its Old Navy outlets positioned away from purchasing malls have been performing higher than others, as they reopen, “and continue to be an advantage.” 

Banana Republic sales dropped 52%, consisting of a 26% leap online and a 71% drop in stores. This model, which focuses on providing garments for women and men to put on to work, has been at a drawback throughout the pandemic, Gap mentioned. It mentioned it’s nonetheless working to shift Banana Republic’s stock to provide extra informal trend. 

Within Athleta — Gap’s athletic attire model for ladies that competes with the likes of Lululemon and Nike — sales had been up 6%, making Athleta the solely division inside Gap Inc. to see total income improve. Athleta’s online sales had been up 74%, whereas retailer sales had been down 45%. 

One method a variety of retailers together with Gap have been ready to slash prices is by paying much less in lease and renegotiating leases with landlords throughout the pandemic. The greatest U.S. mall proprietor Simon Property Group has sued Gap for not paying lease. Gap mentioned Thursday it continues to negotiate lease by lease with mall and purchasing middle house owners. It didn’t name out talks with Simon particularly. 

Gap is, meantime, anticipated to completely shut a variety of its underperforming stores at malls — 225 Gap and Banana Republic areas globally — this yr. 

Gap ended the quarter with $2.2 billion in money and money equivalents on its steadiness sheet, including it’s in a “solid financial position to navigate through the ongoing pandemic and continue investing in its business.” 

It mentioned it just lately secured a $1.87 billion asset-based revolving credit score facility, changing its prior $500 million unsecured revolving credit score facility, which it has but to borrow towards and doesn’t count on to entry this fiscal yr. 

The firm isn’t providing an earnings outlook for 2020 presently, nonetheless, due to the uncertainty from the international pandemic. 

As of Thursday’s market shut, Gap shares are down lower than 1% yr to date. It has a market cap of $6.5 billion. 

Find the full earnings press launch from Gap right here. 

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