Gap issues lackluster outlook for second quarter
Gap Inc. issued a second-quarter earnings forecast that’s below Wall Street analysts’ estimates, as results were dragged down by West Coast delays, foreign currency fluctuations and moves to close a string of Gap stores.
The earnings outlook, announced late Monday, comes as the retailer, which also operates Old Navy and Banana Republic, saw a sales shortfall in the quarter. It also posted a 3 percent drop for a key revenue measure for July. Analysts expected a 2.3 percent decline, according to Thomson Reuters.
The latest sales results and lackluster profit outlook from Gap underscores the big challenges that its CEO Art Peck faces in turning around the business. Peck, who took the top job in February, had been its digital leader overseeing new innovations that cater to mobile-savvy shoppers. He’s been shaking up management at the brands and in June the company announced it was scaling back its Gap store foot print in North America. It plans to close 175 Gap stores in North America over the next few years, leaving about 800 open. The company is also trying to overhaul its fashions to make them more appealing to shoppers.
The company said it expects adjusted second-quarter earnings to be in the range of 63 cents to 64 cents. Analysts expected 66 cents per share, according to FactSet.
Gap Inc. also said that it posted total sales of $3.9 billion for the quarter, down 2 percent from the $3.98 billion in sales in the year-ago period. That was below the $3.9 billion in sales that FactSet had expected.
The company posted declines in revenue at stores opened at least a year at Gap and Banana Republic in July, but saw a solid gain at Old Navy for July. The metric at Gap dropped 7 percent, while at Banana Republic it fell 10 percent. At Old Navy, revenue at stores opened a least a year rose 3 percent.
The company is slated to report final second-quarter results late next week.
In a note published Monday, Stifel analyst Richard Jaffe noted Gap is on track to clear spring and summer merchandise in advance of its third quarter.
“We anticipate that inventory at Gap division will be particularly lean in (the second half),” he wrote.
Shares were unchanged in after-hour trading, after rising 37 cents to $35.26 in regular trading on Monday.
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