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Gap Soars, Beating Estimates on Strong Trading Day

Gap Inc, known for its brands Athleta, Old Navy, and Banana Republic, soars about 10% in after-hours trading after reporting $282 million in quarterly sales that beat the consensus estimates.

The San Francisco-based retailer’s total revenue rose 2% to over 4 billion for the period that ended in October, compared to the $3.9 billion a year prior. Meanwhile, Gap’s comparable sales surged 1%, and its online sales amounting to 39% of its total net sales, rocketed 5% year-over-year.

With consumers returning to work, travel, and social occasions following the end of the two years pandemic restrictions, Gap saw some influx in its sales as the demand for formal clothing and dresses increased despite the persistent inflation.

Banana Republic, Gap’s affordable luxury brand, rose 8% to $517 million for the quarter, while its comparable sales grew 10%.

Old Navy, Gap’s brand that has previously been struggling due to out-of-fashion clothes, grew 10% to $2.1 billion after the brand improved its size and assortment balance.

However, the shift in consumer demand hurt Gap’s Athleta, as the brand experienced flat sales during the quarter.

Gap Inc’s interim CEO, Bob Martin, noted, “I have deep conviction that we have a portfolio of iconic brands that our customers love, increased confidence in our platform to drive leverage and economies of scale and belief in the team’s ability to deliver.”

“We have sharpened our focus on execution to optimize profitability and cash flow, are bringing more rigor to our operations and balancing our assortments in response to what our customers are telling us. While our efforts show early signs of improvement, we are clear that there is work to be done to deliver what our customers, employees and shareholders expect from Gap Inc,” Martin added.

 

Gap and Other Retailers Warned for a Cloudy Holiday

Despite the positive headwinds that Gap has experienced for the quarter, the retailer company still echoed the warning of its competitors for the upcoming holiday season.

Gap Inc’s FCO, Katrina O’Connell, commented, “We did see strong volume in October slow a bit in the end and a little bit of a slow start to November.”

For the fourth quarter, Gap expects its net sales to be in the mid-single digits, against the consensus estimates of a 0.6% decline.

According to an analyst, Gap will most likely struggle for the next 12 months because of its underperforming brands and reliance on low to middle-income consumers.

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