Gap stock drops as Old Navy’s struggles sink sales and outlook

The shares of Gap Inc. they fell in the extended session on Thursday after the clothing retailer produced a larger-than-expected loss and issued a disappointing outlook as the company’s Old Navy brand weighed in on the results.

GPS Gap,
+ 4.41%
shares fell 12% after hours, after a 4.4% increase in the regular session to close at $ 11.12. At the close on Thursday, shares were down 67% over the past 12 months, compared to a 29% drop in the SPDR S&P Retail ETF XRT.
+ 4.78%
and a 3.3% drop in the S&P 500 SPX index,
+ 1.99%.

“Our first quarter results and updated forecasts for 2022 primarily reflect industry-wide headwinds, as well as Old Navy challenges that are affecting our short-term performance,” Sonia said. Syngal, Gap’s executive director, said in a statement. “While we are disappointed to deliver below-expected results, we are confident in our ability to navigate headwinds and re-establish the Old Navy business in order to achieve continued progress in our long-term strategy. “.

By the end of April, the company had warned of larger-than-expected sales declines, as well as the departure of Old Navy Executive Director Nancy Green, who had held the position for about two years. .

Gap posted a first-quarter loss of $ 162 million, or 44 cents a share, compared to a net income of $ 166 million, or 43 cents a share, last year. The company did not provide adjusted earnings results, which exclude share-based compensation items and other items, for the quarter, but reported adjusted earnings of 48 cents per share over the past year period.

Revenue fell to $ 3.47 billion from $ 3.99 billion in the quarter last year, as Old Navy sales turned out to be the biggest disappointment, 19% less than a year ago. up to $ 1.8 billion.

Analysts polled by FactSet had forecast a loss of 15 cents per share on revenue of $ 3.44 billion.

“We are reviewing our fiscal outlook for 2022 to reflect the impact of certain factors affecting our short-term performance, including Old Navy implementation challenges, an uncertain macro-consumer environment, counter-inflation costs and a slowdown. in China that is affecting Gap Brand “. said Katrina O’Connell, Gap’s chief financial officer, in a statement. “We expect our performance to improve modestly in the later half of the year and accelerate as we enter fiscal year 2023.”

The gap forecast adjusted earnings of 40 cents to 70 cents per share for the year in a “low to mid-digit” drop from the previous year.

Analysts had estimated annual earnings of $ 1.22 million on revenue of $ 16.22 billion, down 2.7% year-on-year.

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