Gap shares tumble as August sales slide
Old Navy was the best performing division for Gap in August
US apparel giant Gap saw its share price tumble as it turned in its 15th negative monthly comparable sales result that missed analyst estimates and a fall in net revenues for August.
For the four weeks ended 27 August, comparable sales slid 3% versus a 2% decrease last year. This was steeper than analyst predictions of a 2% decline. The news sent Gap's share price down 1.29% in after-hours trading, signalling an end to a potential turnaround for the retailer which this week saw a massive blaze sweep through its Fishkill distribution centre in New York City.
Same-store declines for July were recorded at its Banana Republic and namesake brands, of 10% and 5%, respectively. Old Navy was the best-performing division and managed to generate a positive 1% comp gain, making it the only unit to beat expectations.
Net sales in the four week period dropped 2% to $1.17bn, down from $1.20bn in the prior year period.
"While we are pleased with the continued progress at Old Navy, we remain focused on improving results across our global brands," says Gap CFO Sabrina Simmons.
The company says it is currently assessing the impact of the distribution centre fire and has "activated extensive contingency plans" designed to help mitigate the overall impact to the business, including leveraging its North American network of distribution centres and ship-from-store capabilities.
Stifel analyst Richard Jaffe says he anticipates challenges in the near term at both the Gap and Banana Republic divisions, despite management's best efforts to improve product.
He adds: "The results at Old Navy are encouraging and we believe fall product is both appealing and well-assorted. The prolonged underperformance at the Gap business despite management's best efforts has undermined our confidence. Management has announced an aggressive cost-cutting and business rationalisation plan that will reduce expenses and improve profitability. While we believe this is the correct move, we recognise this does nothing to improve the appeal or long term success of the Gap or Banana Republic brands."
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