Gap Sales Have Been on the Decline Without Looking Like They'll Rebound
Gap is an important name in the world of fashion, with several stores in its domain, including Old Navy. As such, it came as somewhat of a surprise when the company reported declining sales for the second quarter of 2019, following the decrease in the first quarter.
Some Figures From Q1 and Q2
One of the essential figures in the retail industry is same-store sales, which dropped 4 percent overall during the second quarter for Gap. Its Old Navy brand had its comparable sales decline 5 percent. This is crucial as Old Navy generates nearly half of Gap's revenue.
What It Means for Gap
These declining sales have several important implications for Gap, as it caused the diluted earnings per share in 2019 to be expected at between $1.88 to $2.08 as of late August. By comparison, as of May, the prediction was between $2.04 to $2.14.
Additionally, the decline has implications for Gap's plans of a spinoff for its Old Navy chain. When Gap released its sales figures for the second quarter, the plans for that spinoff were still underway, and Gap representatives indicated that they remained confident.
More Recent Data – The Third Quarter
Gap is not pleased with its figures for the third quarter either, and the retailer indicates that it is focusing on aggressively addressing the operating issues that led to the statistics in question. Specifically, the third quarter saw revenue fell to $4 billion, a drop of 2 percent, and there was an adjusted value of 53 cents for each share.
While this was a decline, it was still better than analysts had estimated. They had predicted 51 cents per share and revenue at $3.96 billion. Despite beating expectations, Gap was well aware that the third-quarter would be dismal.
Same-store sales, however, did worse than analysts predicted, 4 percent compared to 2.3 percent. The Gap brand declined the most out of the company's products, 7 percent, although all of its brands suffered a decrease.
Adjusted Predictions
Based on the third-quarter figures, Gap once again changed its expected profit for 2019. Analysts estimate this figure at $1.83 while Gap predicts it will be between $1.70 and $1.75. Previously, Gap had predicted that same-store sales would be down low-single digits. Following the third quarter, however, the company adjusted this to mid-single digits, an even worse outlook.
Spinoff Still Likely
Even with the disappointing figures, Gap looks forward to the split from Old Navy. The company also has 'renewed optimism' regarding the plan.
Sources:
https://www.cfo.com/financial-performance/2019/11/gap-beats-estimates-but-comp-sales-dip-4/
