Gap Inc. Reported Third-Quarter Earnings

This week Gap Inc. reported fiscal third-quarter earnings that failed to meet expectations. Interestingly, higher spending on marketing affected the situation. The company’s namesake and Banana Republic brands reported double-digit declines. Hopefully, Old Navy and Athleta saw gains in the quarter.

It is worth mentioning that the global health crisis made it difficult for many companies to offer a future outlook. However, Gap Inc. remains optimistic about the future. Importantly, the retailer expects fourth-quarter sales to be about equal to or slightly higher than a year ago. 

Based on the information provided by the company, a rising number of coronavirus cases around the world could still negatively impact sales and traffic in stores. As a reminder, retailers including Abercrombie & Fitch and Macy’s cited a similar challenge in recent days. It is not surprising as the threat of additional, temporary store closures due to the pandemic represents a serious challenge. 

Gap Inc. and main findings

Interestingly, revenue in the quarter surpassed expectations. Notably, Gap Inc.’s same-store sales during the latest quarter grew 5%, with Athleta reporting a record quarterly increase. However, the company is still working to turn around its Gap and Banana Republic divisions. Importantly, the company named a new chief, who has experience with consumer goods. This week a San Francisco-based company named Sandra Stangl as the new president and CEO of Banana Republic. Gap Inc. wants to revive the brand.

As a reminder, Banana Republic is famous for its work apparel. In the latest quarter net sales fell 34% and same-store dropped 30%. The company is trying to add more casual attire to this brand. This way the company wants to meet the preferences of women working at home during the pandemic. 

Importantly, in the latest quarter Gap earned $95 million, or 25 cents per share, compared with $140 million, or 37 cents per share, a year earlier. 

People should take into account that sales for the period were about flat with the prior year at $3.99 billion and outpaced expectations for $3.82 billion. 

According to the company, it added more than 3.4 million new customers online. Moreover, it reiterated plans to derive half of its sales from the web by 2023. San Francisco-based is working hard to adapt to the ever-changing environment. For example, the company cited its mask business as a contributing factor to attracting new customers to Athleta. As can be seen from this example, the company has the potential to reach good results.