Financial Performance

Gap Beats Estimates But Comp Sales Dip 4%

“We are not pleased with the third-quarter results and are focused on aggressively addressing operational issues," the struggling retailer says.
Matthew HellerNovember 22, 2019
Gap Beats Estimates But Comp Sales Dip 4%

Gap reported another tough quarter while reiterating its commitment to spinning off its Old Navy brand.

For the third quarter, the struggling retailer earned an adjusted 53 cents per share as revenue fell 2% to $4.00 billion. The results beat analysts’ expectations of earnings of 51 cents per share on revenue of $3.96 billion but Gap had warned earlier this month that it was anticipating a dismal performance.

Same-stores sales, a key retail metric, dropped 4%, worse than analysts’ estimates of a 2.3% dip. All three of Gap’s brands showed negative growth, with the namesake brand declining the most, at 7%.

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“We are not pleased with the third-quarter results and are focused on aggressively addressing the operational issues that are hindering the performance of our brands,” interim CEO Robert J. Fisher said in a news release.

The son of Gap’s co-founders took over as chief executive after the surprise resignation of Art Peck, which raised doubts about the company’s plan to spin off the once-strong, low-priced Old Navy brand.

But according to Fisher, Gap is continuing to “make progress against our separation plans, which will provide improved focus and a further catalyst for transformation. Both companies will benefit from this  but new Gap Inc. in particular will have a renewed urgency and catalyst to reinvent how it operates.”

CFO Teri List-Stoll told analysts on an earnings call that “employees are energized” about the split, and there’s “renewed optimism” about that plan.

The spinoff had been predicated on Old Navy’s out-performance of Gap’s other brands but in the third quarter its comparable sales fell 4% — worse than Banana Republic’s 3% decline. The company said it had “lost sight of what [the Old Navy] consumer really valued.”

Gap affirmed its full-year profit outlook, saying it expects to earn between $1.70 and $1.75 a share, compared with analysts’ estimates of $1.83. It also expects total same-store sales for the year to be down mid-single digits, compared with a prior outlook of down low-single digits.

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