An employee of Gap Inc. works in a store in San Francisco.
Gap Inc. Thursday withdrew its financial outlook for the year after it swung to a net loss in its fiscal second quarter and its Old Navy chain continued to struggle with the wrong mix of sizes and styles.
The San Francisco-based company, which is in the process of finding a new CEO, cited recent execution difficulties and uncertain macroeconomic trends for withdrawing its guidance for 2022. Decades of high inflation hurts lower-income consumers who are among its core customers. belong to some of the company’s brands.
“In the near term, we are taking steps to sequentially reduce inventory, rebalance our range to better meet evolving consumer needs, aggressively manage and re-evaluate investments, and strengthen our balance sheet,” said Chief Financial Officer Katrina O’Connell in a news story. release.
For the three-month period ended July 30, the retailer reported a net loss of $49 million, or 13 cents per share. A year earlier, it reported net income of $258 million, or 67 cents per share.
Excluding one-time items, the company earned 8 cents per share.
Gap’s revenue for the period fell 8% to $3.86 billion, from $4.2 billion a year earlier. That surpassed estimates of $3.82 billion, according to a study by Refinitiv. Shares of Gap were up 7% in extended trading.
Online sales decreased by 6%, representing 34% of total sales.
Comparable store sales, which track sales online and in stores open for at least 12 months, were 10% lower than a year ago. That included a 15% drop at Old Navy, which the company said was hit by inventory slowdowns, “product acceptance problems” in key categories and slowing demand from lower-income buyers.
At the eponymous Gap banner, global comparable store sales declined 7%, partly due to pending and planned store closures.
Comparable store sales at Athleta were down 8%, with the company noticing a shift in consumer preference from athleisure to work-based categories. At Banana Republic, comparable store sales increased by 8%, thanks to the retailer’s investments in quality and changing consumer trends.
Gap said in prepared comments that July and August are beginning to see an improvement in sales trends, coinciding with a decline in gas prices. However, the company does not provide a full fiscal year forecast due to continued uncertainty about consumer behavior and promotions at other retailers.
The company closed the last quarter with inventory of $3.1 billion, up 37% from the prior year. Some of this was intentionally packaged to be sold in another season, and some of it is still on the way, Gap said.
As part of its cost-cutting efforts, the company said it has cut the number of new Old Navy stores it plans to open in the second half of the year.
“While our increased inventory and squeezed margins are the current reality against volatile market conditions, they do not determine our ability to capitalize on Gap Inc.’s strengths to win,” said Bob Martin, Gap’s interim CEO, who also serves as executive chairman.
Sonia Syngal, former CEO of Gap, abruptly retired from her position in July. The company also recently named a new chief for its Old Navy division.