Gap Inc. (NYSE:GPS) surges 0.84% in pre trading session on Tuesday as the apparel company demonstrated that it effectively shifted the identity of its brand from “T shirt and jeans” to lifestyle choice by exceeding analyst forecasts for both its quarterly results and outlook, as millennials purchase its attire for their return to the workplace.
Net sales increased 2.9% year on year to $836 million from $814.4 million, with brand comparable sales up 14%. In contrast to Gap’s somewhat unchanged expectations, Abercrombie & Fitch anticipates full-year net sales growth of 2% to 4%, with second-quarter sales off to a strong start.
Gap Inc. posted better-than-expected first-quarter earnings, demonstrating that the retailer’s cost-cutting strategies are spurring stronger performance.
The period’s gross margin was higher than the average analyst forecast, while adjusted earnings per share were somewhat higher than predicted. According to the corporation, the improvement was attributed in part to decreased air freight costs and less discounts. Gap has also slashed employment and cut costs.
Meanwhile, comparable sales fell by 3% across Gap’s four brands. This was mostly due to big losses at Banana Republic and Athleta, while Old Navy decreased little and the Gap brand increased by 1%. The findings indicate that Gap will need to do more than just slash costs to reposition its brands for long-term development.
“We continue to take the necessary actions to drive critical change at Gap Inc., ultimately getting us back on a path toward delivering consistent results long-term,” interim Chief Executive Officer Bob Martin said in a statement.
Martin has been in the temporary position for about a year. The organization stated that it is still looking for a new CEO and is looking forward to “the time when we will introduce this great company’s next leader.”
Inventories fell 27% from April 1 to April 29, the second consecutive dip after four quarters of double-digit growth. Given Gap’s history of excess inventory, this is yet another encouraging indicator for investors.
Gap expects net sales to fall in the mid-to-high single digits in the current quarter, owing in part to the sale of Gap China earlier this year. In the same time in 2022, the unit produced $60 million in revenue, worsening the year-over-year comparison. Gap anticipates a low-to-mid single-digit net sales drop and ongoing margin improvement for the entire year.
In April, the business announced the elimination of over 1,800 employees as part of a larger restructuring plan that is intended to save approximately $300 million in yearly expenditures.
Other big US apparel retailers, including Urban Outfitters Inc., Kohl’s Corp., and Abercrombie & Fitch Co., announced earnings that mainly above forecasts this week. Despite sluggish or negative sales growth, investors have remained enthusiastic about industry profitability gains.
