Old Navy gives Gap a little something to cheer about amid sales slump
By Parija Kavilanz, CNN
New York (CNN) — Gap Inc. on Thursday reported third-quarter results that showed the retailer’s continued struggle to lift overall sales across its portfolio of brands. But signs of a turnaround for its Old Navy division offered at least something to cheer about.
Overall revenue in the quarter for Gap Inc. fell 7% in the period over last year to $3.8 billion. But that was better than analysts estimates for revenue to come in at $3.6 billion, according to analysts surveyed by Refinitiv. It loggeds adjusted earnings-per-share of 59 cents compared to analysts estimates of 19 cents a share.
Gap shares jumped 12% in after-hours trading on Wednesday.
Store sales across its brands in the quarter dropped 6%, while companywide online sales slumped 8% over the same time last year.
Looking at its individual brands, sales at Gap’s namesake stores tumbled 15% versus a year ago. Excluding the negative impact from the sale of Gap China and the shutdown of Yeezy Gap, net sales for Gap were down 6% versus last year. The retailer said women’s and baby products were two categories where people shopped the most last quarter.
Elsewhere, Banana Republic’s net sales tumbled 11% versus last year and sales at its Athleta unit also declined a steep 18% versus a year ago.
But the retailer’s lower-priced Old Navy division logged a slimmer 1% sales dip in the period compared to last year and an 1% increase in its stores open at least a year, driven primarily by purchases of women’s, baby and kids clothing.
This is the first quarter for the retailer under its new CEO Richard Dickson. Dickson, who was previously president and chief operating officer of Mattel, assumed the helm at Gap Inc. on August 22.
Industry watchers credit Dickson with reinventing Mattel’s iconic Barbie franchise, which is having a blockbuster year on the back of record-breaking box-office sales for the “Barbie” movie. “Barbie” was distributed by Warner Bros. Pictures, which is owned by CNN’s parent company.
The hope is that Dickson can pull off a similar revival for Gap Inc., which has struggled to attract shoppers, especially younger consumers, with exciting, stylish and on-trend merchandise across its four divisions and continues to suffer through a protracted sales slump. Gap and other sellers of discretionary purchases such as clothing and footwear are also contending with a pullback in spending, especially among budget-conscious households.
“Gap has stagnated for years so it would be unfair to expect a new CEO to put the company back on track overnight,” said Neil Saunders, retail analyst and managing director at GlobalData Retail.
“Richard Dickson has definitely started to change the narrative at Gap and seems to have come in with a clear plan to reinvigorate the business. However, these are early days and the impact on the shop floor remains muted,” he said. “It will take time for the changes to filter through and even longer for that to impact consumer perception and buying behavior.”
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