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Gap stock plunges after holiday sales fall, including at Old Navy

Gap stock plunges after holiday sales fall, including at Old Navy
Judy Slater helps a customer at the Westfield Fashion Square Gap store in Sherman Oaks in November. (Ricardo DeAratanha / Los Angeles Times)

Shares of Gap Inc. plummeted Friday, the day after the retailer reported a decline in its holiday season sales, including at stalwart brand Old Navy.

Its stock sank $3.83, or more than 14%, to close at $22.91 — its lowest price in almost four years. The San Francisco company is having a rough stretch: Shares are down nearly 47% from a year ago.

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Net sales for the company decreased 4% to $2 billion in the five-week period that ended Jan. 2.

Sales were down across the company's brands.

Gap Brand Global was down 2% from a year earlier -- not as sharp a decline as it experienced during the 2014 holiday season, when sales declined 5%. Banana Republic Global declined 9% from a year earlier; during the 2014 holidays, sales had been flat.

Old Navy sales were down 7%. That brand had been a bright spot during the 2014 holidays, when sales jumped 8%.

Jack Calandra, Gap senior vice president of corporate finance and investor relations, acknowledged the lower numbers Thursday in a sales and revenue call.

"Traffic continued to be challenging in December and was especially disappointing at Old Navy," he said.

The results were not a shock. The apparel industry as a whole had a difficult holiday season, said Bridget Weishaar, senior equity analyst at Morningstar.

"Apparel sales were just really, really weak and discounted for the holiday season," she said. "That's what impacted Old Navy."

Macy's also was among those with disappointing holiday sales. The season was warmer than expected, and that company's chief executive  attributed most of Macy's decline to "shortfalls" in cold weather gear.

Old Navy in particular was coming off several good seasons, which had boosted results and made recent performances hard to top.

Simeon Siegel, senior retail analyst at Nomura Research, said Gap had warned investors all year that there would be challenges.

"To Gap's credit, they've telegraphed very explicitly that they did not expect to do well with Gap brand this entire year," he said.

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Instead, the company has planned a spring collection that will deliver new products to customers.

Weishaar said the collection is spearheaded by a new designer and seems to incorporate more customer research into the clothing line but probably will still face challenges from the continued weak apparel environment.

"They have a lot riding on the first quarter," she said.

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