Typhoon and unseasonably warm weather reached the sales gap during the fiscal third quarter, but the apparel company still posted results that were better than expected, leading to raising the annual guidance for the third time this year.
Gap, which runs Old Navy, Banana Republic, Athleta and its namesake banners, now expects fiscal 2024 sales to rise between 1.5% and 2%, compared to its previous guidance of “a slight increase.” It’s ahead of the 0.4% growth that LSEG analysts had expected, and bodes well for the all-important holiday shopping season, which is currently underway.
The company also expects gross profit and operating income to grow more than previously expected.
Here’s how the nation’s largest specialty apparel retailer performed compared to what Wall Street anticipated, based on a survey of analysts by LSEG:
- Earnings per share: 72 cents vs. 58 cents expected
- result: $3.83 billion vs $3.81 billion expected
Gap reported net income for the three-month period ended November 2 was $274 million, or 72 cents per share, compared with $218 million, or 58 cents per share, a year earlier.
Sales rose to $3.83 billion, up about 2% from $3.78 billion a year earlier.
At Gap’s business, unseasonably warm weather impacted sales by about 1 percentage point during the quarter, while storms and hurricanes caused store sales to drop 2%, CEO Richard Dickson told CNBC in an interview.
“We had unusual conditions, hurricanes, storms that caused closures to do almost a 180 at the peak of the impact,” Dickson said, adding that the storm affected Old Navy, Gap’s biggest brand by revenue, the most.
As soon as the weather turned, sales “rebounded” and the holiday shopping season got off to a “strong start,” Dickson said.
“We are energized about the holidays. Our team is really focused on executing our plans. If we compare ourselves to where we were at the end of the year, our brand is in a more pronounced place than last year,” he said. “We have a stronger brand identity and we’re more practiced in our much-discussed playbook, driving better products, better pricing, better relevance, better consumer experience and execution excellence.”
Since Dickson took the helm of Gap more than a year ago, he has worked to turn the business around after years of decline. Under his direction, the company has embraced nostalgia marketing and celebrity partnerships to regain cultural relevance. Sales have grown over the past four quarters, but the company is still smaller than it used to be, critics say. should do more to fix the product range and make it sell full price.
Here’s a closer look at how each brand performed:
Old Navy: Gap said sales at its biggest brands rose 1% to $2.2 billion, while comparable sales were flat, shy of the 0.9% growth analysts were expecting, according to StreetAccount. The Old Navy children’s category is particularly affected by the warmer weather, Dickson said.
gap: Gap’s eponymous banner rose 1% to $899 million during the quarter, while comparable sales rose 3% — better than the 2.3% growth expected on Wall Street, according to StreetAccount. The brand has seen four straight quarters of comparable sales and benefited from better marketing and products, the company said.
Banana Republic: The trendy workwear line grew sales 2% to $469 million, while comparable sales fell 1%, worse than the 0.8% decline StreetAccount had expected. The brand has been working to transform its men’s business, which delivered results during the quarter. Overall, it’s still focused “on fundamental repairs,” the company said.
Athlete: The athletic arm of the Gap empire grew sales 4% to $290 million, while comparable sales rose 5%. The results are not comparable to the estimates. In the year-ago period, comparable sales were down 19% at Athleta. Under new CEO, former Alo Yoga boss Chris Blakeslee, the brand has been able to turn things around.
