• Q4 profit plummets 32.9% to $214m
  • Sales fall 6.9% to $4.39bn
  • Analyst says turnaround visibility remains low
A turnaround at Gap could happen later than expected

A turnaround at Gap could happen later than expected

Gap Inc's turnaround visibility remains low and could happen later than anticipated – late 2016/early 2017, according to one analyst, after the US clothing giant saw its fourth-quarter and full-year profits slump. 

The San Francisco-based company, which operates more than 3,300 stores, said net income amounted to US$214m for the 13 weeks to 3 January, compared to $319m in the same period a year ago. 

Sales fell 6.9% to $4.39bn from $4.71bn last year. Comparable store sales declined 7%, hurt by a 14% decline at Banana Republic, an 8% drop at Old Navy, and a 3% fall at Gap. 

For the full-year, net income declined 27.1% to $920m, while sales were down 3.9% to $15.8bn. 

"With a year of transition behind us, I'm confident that we have the right strategies in place to fuel our long-term growth," said CEO Art Peck. "We made significant progress in 2015 transforming our product operating model, enabling us to be more responsive to trends and market conditions, and consistently deliver on-brand product collections." 

The company expects fiscal 2016 earnings per share to range from $2.20-$2.25, which includes the estimated negative impact of around $0.19, or over $120m pre-tax, due to foreign currency fluctuations at current exchange rates.

FBR & Co analyst Susan Anderson said: "Management remains optimistic about new product for Gap and Banana Republic, but we believe turnaround visibility remains low and could be further out than anticipated, given time needed to regain the consumer and a highly competitive environment (potentially late 2016/early 2017)."

Stifel analyst Richard Jaffe added: "While Gap remains a well-controlled and well-managed business, the merchandising challenges facing all divisions continues to compromise results."