Gap Continues to Struggle

Gap Inc. (San Francisco) reported lower second-quarter sales at all four of its operating units: Old Navy, Gap, Banana Republic and Athleta. Those results also show its flagship brand continues to feel the fallout from its failed Yeezy partnership.

Here are the results for the four brands and the retailer’s reasons for their respective performances:

Old Navy: Net sales of $1.96 billion, down 6 percent compared to last year. Strength in women’s tops and woven bottoms and improved trends in men’s and kids’ were offset by softness in the active category and continued slower demand from the lower-income consumer. Comparable sales were down 6 percent.

Gap: Net sales of $755 million, down 14 percent from a year earlier. Excluding the negative impact from the sale of Gap China, the shutdown of Yeezy Gap, and foreign exchange headwinds, net sales were down 4 percent versus last year. Sales were driven by continued strength in the women’s category, offset by strategic store closures in North America. Comparable sales were down 1 percent.

Banana Republic: Net sales of $480 million, down 11 percent compared to last year. While the brand maintained market share in the quarter, sales growth remains impacted in the short-term as the brand laps the outsized growth last year driven by the shift in consumer preferences. Comparable sales were down 8 percent.

Athleta: Net sales of $341 million, down one from a year. While sales continue to be impacted by product acceptance challenges, the brand has taken near-term actions to improve product presentation and creativity to better align with Athleta’s performance DNA. Comparable sales were down 7 percent.

Overall, Gap Inc. reported net sales of $3.55 billion for its second quarter, down 8 percent from a year earlier, and adjusted net income of $127 million.

Though he just officially took the reins at the retailer earlier this week, Gap’s President and CEO Richard Dickson included this statement in the earnings release:

“We’re seeing encouraging signs of progress, as our teams streamline the way we work so we can focus on growth-driving initiatives – a virtuous cycle that we’ll look to become our norm. This means we have to do things differently, with a clear focus on redefining our brands’ meaning to consumers, focusing on creativity, designing for relevance as a pursuit rather than a goal, and leveraging our remarkable legacy to shape an exciting new future.”

Looking ahead, Gap Inc. said it anticipates fiscal 2023 net sales could decrease in the mid-single-digit range compared to last year. The company also expects fiscal 2023 capital expenditures in the range of $500 million-$525 million.