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Gap (GPS) reports fiscal Q2 2022 results

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An worker hands a customer a shopping bag at an Old Navy store in San Francisco.

David Paul Morris | Bloomberg | Getty Images

Gap Inc. on Thursday withdrew its financial outlook for the yr after it swung to a net loss within the fiscal second quarter and its Old Navy chain continued to struggle with the fallacious mixture of sizes and styles.

The San Francisco-based company, which is within the midst of finding a recent CEO, cited its recent execution challenges and unsure macroeconomic trends for withdrawing its guidance for 2022. A long time-high inflation is hurting lower-income consumers who’re among the many core customers for a few of the company’s brands.

“Within the near-term, we’re taking actions to sequentially reduce inventory, rebalance our assortments to raised meet changing consumer needs, aggressively manage and reevaluate investments, and fortifying our balance sheet,” Chief Financial Officer Katrina O’Connell said in a news release.

For the three-month period ended July 30, the retailer reported a net lack of $49 million, or 13 cents per share. A yr earlier, it reported a net income of $258 million, or 67 cents a share.

Excluding one-time items, the corporate earned 8 cents a share.

Gap’s revenue for the period fell 8% to $3.86 billion from $4.2 billion a yr earlier. That topped estimates for $3.82 billion, in line with a Refinitiv survey. Shares of Gap were up 7% in prolonged trading.

Online sales dropped 6%, representing 34% of total sales.

Comparable sales, which track revenue online and at stores open for a minimum of 12 months, were down 10% from a yr ago. That included a 15% decline at Old Navy, which the corporate said was hit by inventory delays, “product acceptance issues” in key categories and slowing demand amongst lower-income shoppers.

At the corporate’s namesake Gap banner, global comparable sales fell 7%, partially as a result of ongoing and planned store closures.

Comparable sales at Athleta were down 8%, with the corporate noting a shift in consumer preference from athleisure to work-based categories. At Banana Republic, comparable sales rose 8%, which the retailer chalked as much as its investments in quality and shifting consumer trends.

Gap said in prepared remarks that it began to see an improvement in sales trends in July and into August coinciding with a drop in gas prices. Nonetheless, the corporate isn’t offering a forecast for its full fiscal yr as a result of ongoing uncertainty around consumer behavior and promotions at other retailers.

The corporate ended the newest quarter with inventory of $3.1 billion, up 37% from the prior yr. A few of this was intentionally packed away to be sold in one other season, and a few of it continues to be in transit, Gap said.

As a part of its cost-cutting efforts, the corporate said it reduced the number of recent Old Navy stores it planned to open within the back half of the yr.

“While our elevated inventory and pressured margins are current realities against unsettled market conditions, they don’t define our ability to capitalize on Gap Inc.’s strengths to win,” said Gap’s interim CEO Bob Martin, who can also be executive chair.

Gap’s former CEO Sonia Syngal stepped down from her role abruptly in July. The corporate also recently named a recent leader for its Old Navy division.

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