Financial Performance

Gap Blunts Covid Impact With E-Commerce Surge

"We nearly doubled our e-commerce business, with approximately 50% online penetration, demonstrating our ability to pivot to a digitally-led culture."
Matthew HellerAugust 28, 2020
Gap Blunts Covid Impact With E-Commerce Surge

Gap Inc. reported better-than-expected quarterly results as store reopenings and strong online business cushioned the retailer from the impact of the coronavirus pandemic.

Gap’s net sales fell 18% to $3.3 billion for the second quarter and the company swung to a net loss of $62 million, or 17 cents per share, from a profit of $168 million, or 44 cents per share, a year earlier.

But Gap had reported a net sales plunge of 43% to $2.1 billion and a quarterly loss of nearly $1 billion for the first quarter as it struggled with temporary store closures. As of Aug. 1, approximately 90% of Gap’s global fleet was open for business.

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Analysts had expected a loss of 41 cents per share on revenue of $2.91 billion.

“Our strong performance in the second quarter reflects the customer response to our brands, products and experiences, particularly as we’ve rapidly adapted to the changing environment. We nearly doubled our e-commerce business, with approximately 50% online penetration, demonstrating our ability to pivot to a digitally-led culture,” CEO Sonia Syngal said in a news release.

The decline in net sales reflected a 95% increase in online sales, offset by a 48% decline in store sales, which were impacted by partial closures during the quarter.

All but one of Gap’s brands experienced lower sales, with the namesake brand 28%, Banana Republic down 52%, and Old Navy down 5%. Sales at athletic apparel brand Athleta rose 6%.

Gross margin fell 3.8 percentage points to 35.1%, reflecting increased shipping expenses as online sales grew and the company leveraged its stores to fulfill the strong online demand.

Gap said it expects sales trends to improve for the remainder of the year, fueled by Old Navy and Athleta, but it expects continuing weakness at Banana Republic, which is known for women’s work wear.

“Our strong financial position, healthy cash flow generation and our continued execution of initiatives to drive profitable growth provide the foundation to emerge from the crisis well-positioned to compete in a rapidly evolving marketplace,” CFO Katrina O’Connell said.

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