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Gap Inc’s new CEO Richard Dickson took over after the company reported an 8 percent drop in sales in Q2 to $3.55 billion, compared with $3.86 billion a year earlier.
Gap Inc (NYSE: GPS) shares closed Thursday trading at $9.53, down 1.24 percent from the day’s opening price. The losses were however recovered during the after-hours session with a rise of about 1.47 percent to trade around $9.67. The billion-dollar lifestyle brands company released its second quarter fiscal year 2023 financial results on August 24, which sparked mixed sentiments from the shareholders. In Q2 which ended on July 29, 2023, Gap reported adjusted earnings per share of about 34 cents compared with 9 cents expected by analysts surveyed by Refinitiv.
Notably, the company reported a revenue of about $3.55 billion during the second quarter, whereas analysts believed that Gap would release total sales of around $3.57 billion. Perhaps the most disappointing thing most shareholders resonated with was the projection of a double-digit decline in sales during the fiscal third quarter. Moreover, analysts surveyed by Refinitiv forecasted that the company would report third-quarter sales to drop by about 6.8 percent.
Gap Q2 2023 Financial Statements
During the second quarter, Gap announced its net sales declined by about 8 percent to $3.55 billion on a YoY basis. Specifically, the store sales declined by about 7 percent YoY. Gap announced that it closed the second quarter with about 3,456 store locations in over 40 countries, out of which 2,592 were company-operated. Meanwhile, the company announced that its online sales decreased by about 11 percent compared to last year, but represented about 33 percent of the total net sales during the second quarter.
The company announced an operating income of about $106 million and an adjusted net income of approximately $127 million during the second quarter. Nonetheless, the company urged investors to remain cautious with the mixed economic outlook.
“We are pleased to deliver meaningful operating margin expansion and strong free cash flow during the second quarter driven by modest market share gains, our significantly improved inventory position, and our actions to transform the company’s operating model and structure,” said Katrina O’Connell, Executive Vice President and Chief Financial Officer, Gap Inc. “While we are encouraged by our near- term progress, we remain mindful of the mixed economic and consumer environment in which we are operating and continue to plan the business prudently.”
Forward, Gap sets images that the third quarter net sales will decline in the low double-digit range compared to last year’s net sales of about $4.04 billion. Additionally, the company anticipates that fiscal 2023 net sales could decrease in the mid-single digit range compared to last year’s net sales of $15.6 billion.
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As Gap increased layoffs during the first quarter, online sales declined 9 percent YoY but accounted for about 37% of net sales.
After starting the year with a bearish sentiment, Gap Inc (NYSE: GPS) – an American apparel company – saw its shares rise approximately 14 percent during Thursday’s after-market hours to trade around $8.44. The $2.79 billion valued company reported its first quarter earnings result on May 25, which was largely in line with analysts’ expectations. For Q1 2023 which ended on April 29, 2023, Gap reported revenue of $3.28 billion, whereas analysts surveyed by REFINITIV expected $3.29 billion.
As a result, the company posted an adjusted earnings per share of 1 cents while analysts surveyed by REFINITIV expected a loss of 16 cents during the quarter. Notably, the first quarter results marked the last days of Bob Martin, Executive Chairman and Gap Interim CEO, as the board of directors searches for a new head.
“The Gap Inc. Board of Directors and I have a deep appreciation for and confidence in the work that has taken hold under Bobby Martin and the Leadership Team, with results already showing progress, and more importantly, a collective focus on continued improvement still ahead. As we are engaged toward the appointment of a new Gap Inc. CEO to carry this work into the future, we look forward to the time when we will introduce this great company’s next leader – one who will bring passion, vision and an unwavering focus on the customer,” said Mayo Shattuck, Gap’s Lead Independent Director.
Closer Look at Gap Q1 2023 Results and Market Outlook
The company announced that it closed the first quarter with 3,453 store locations in more than 40 global countries, out of which 2,601 are Gap operated. The company’s net sales declined approximately 6 percent during the first quarter compared to the same time last year. As the company focuses more on online sales, internet sales declined about 9 percent during the first quarter compared to the same time last year. Reportedly, online sales accounted for about 37 percent of the total sales during the first quarter.
Last month, the company announced it plans to send home another 1,800 employees, where 25 percent of headquarters staff will be affected. Earlier, the company had notified investors that only 500 employees would lose their jobs.
As for the specific brands, Gap reported that Old Navy posted net sales of about $1.8 billion, down 1 percent YoY. The GAP segment reported net sales of about $692 million, a decline of approximately 13 percent compared to the same time last year. The company’s Banana Republic posted net sales of about $432 million during the first quarter, down 10 percent YoY. The Athleta section posted net sales of about $321 million during the first quarter, down 11 percent YoY.
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