Gaps comparable store sales fell 6% in March

Gap's comparable store sales fell 6% in March

A lacklustre spring merchandise assortment that failed to drive sales and resulted in a surplus of inventory led to a "disappointing" March performance for Gap Inc, with the US clothing giant's comparable store sales falling for the twelfth month in a row. 

The San Francisco-based company, which operates more than 3,300 stores, saw comparable store sales fall 6%, hurt by a 14% decline at Banana Republic, a 6% drop at Old Navy and a 3% dip at its namesake brand. 

Net sales fell 6.5% to US$1.43bn for the five weeks to 2 April, compared to $1.53bn in the same period a year ago. 

"While March proved challenging, we remain focused on taking the necessary steps to improve results across the portfolio throughout the year," said CFO Sabrina Simmons. 

Stifel analyst Richard Jaffe described the performance as "disappointing", with the retailer's comparable store sales decline below its estimate and consensus. 

Although sales in the first few weeks of March were stronger than the 6% decline for the month, trends deteriorated later in the month as Gap did not experience the pre-Easter sales build that management expected. 

"We believe this was due to weak traffic and likely poor customer response to a lacklustre spring merchandise assortment, particularly at Gap and Banana Republic. Below plan sales in March resulted in excess inventory, requiring additional markdowns to clear in April, pressuring first-quarter margins."

UBS analyst Michael Binetti added that April is likely to be an even tougher retail environment than March for retailers, including Gap. "Our early April channel checks suggest traffic is slow throughout retail and our weather expert forecasts that April will be much colder than normal (a negative for softlines retail)."

Gap recently said it was "encouraged" by the initial response to its spring collection, but explained that in-house quality mis-steps coupled with the race against the clock to translate trends from the catwalks to the high street are making its work doubly difficult. 

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