Financial Performance

Gap’s Pandemic Pain Worse Than Expected

The troubled retailer said its online growth "leaves us well-positioned to fuel our brands going forward" but its shares sank 5.5%.
Matthew HellerJune 5, 2020
Gap’s Pandemic Pain Worse Than Expected

Gap shares tumbled in after-hours trading Thursday as the troubled retailer reported a coronavirus-related loss that was worse than expected.

For the first quarter, Gap swung to a net loss of $932 million, or $2.51 per share, from with a profit of $227 million, or 60 cents a share, a year ago. Net sales dropped 43% to $2.11 billion, reflecting the temporary closure of approximately 90% of Gap’s global store fleet amid the pandemic.

More than 1,500 of its stores have now reopened and the company said it “had leveraged its omni capabilities to continue to serve customer demand online through its scaled e-commerce platform.”

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Online sales increased 13% year-over-year in the quarter ended May 2 and by 100% year-over-year last month.

“This online momentum, enabled by new omni-capabilities that have expanded the way customers can shop with us, leaves us well-positioned to fuel our brands going forward,” CEO Sonia Syngal said in a news release.

But in the extended session, Gap shares fell 5.5% to $11.47. Analysts had expected a loss of 60 cents per share on revenue of $2.35 billion.

As Barron’s reports, “Gap is hardly the only apparel retailer feeling the heat, but the company had been struggling even before the pandemic.” Its shares are down more than 31% for the year even though they got a boost after it scrapped its plan to spin off its Old Navy brand.

Since April, Gap has stopped paying rent at all store locations affected by mandatory closures during the pandemic. Simon Property Group, the largest mall operator in the country, has sued the company for $69.5 million in unpaid rent across more than 400 properties.

“We are in active and ongoing negotiations with our landlords to work through this crisis together,” Gap CFO Katrina O’Connell said Thursday. “We value these relationships and are committed to finding mutually agreeable solutions that will enable both of us to benefit from an aligned strategic plan.”

Among the four Gap brands, net sales fell 42% at Old Navy in the first quarter, 50% at Gap, 47% at Banana Republic, and 8% at Athleta.

Cindy Ord/Getty Images