Gap reports another period of declining sales across all brands, warns of 'uncertain consumer'

Gap reported mixed results connected Thursday and underwhelming current-quarter guidance arsenic the longtime promenade retailer warned of an "uncertain consumer" and posted different 4th of declining income crossed each 4 of its brands.

The institution is projecting nett income to alteration successful the debased double-digit scope for the fiscal 3rd 4th compared to past year's nett income of $4.04 billion. Analysts had expected third-quarter income to beryllium down 6.8%, according to estimates compiled by Refinitiv.

For the three-month play that ended July 29, Gap bushed Wall Street's estimates connected the bottommost enactment but fell abbreviated connected the top.

Here's however the apparel retailer did successful its fiscal 2nd 4th compared with what Wall Street was anticipating, based connected a survey of analysts by Refinitiv:

The company's reported nett income for the 4th was $117 million, oregon 32 cents per share, compared with a nonaccomplishment of $49 million, oregon 13 cents per share, a twelvemonth earlier. Excluding one-time restructuring costs, Gap reported a nett income of 34 cents per share.

Sales dropped 8% to to $3.55 billion, compared with $3.86 cardinal a twelvemonth earlier.

Same store income astatine the institution were down 6% during the quarter, portion analysts had expected comparable income to beryllium down 4.4%, according to StreetAccount.

Gross margins, which person been expanding implicit the past 2 quarters, were up 3.1 percent points to 37.6% acknowledgment to little aerial freight expenses and a slowdown successful discounting, Gap said. It expects gross margins to proceed to turn passim the fiscal year.

Halfway into Gap's fiscal year, the retailer is expecting full-year income to driblet successful the mid-single digit scope compared to past year, which is successful enactment with what analysts had expected, according to Refinitv.

The study comes 2 days into Richard Dickson's tenure arsenic Gap's caller CEO. The erstwhile Mattel executive, who started successful the caller relation connected Tuesday, is simply a branding adept who oversaw Mattel's Barbie franchise. Gap is betting Dickson tin respire caller beingness into Gap's brands: its namesake banner, Old Navy, Banana Republic and Athleta. 

All 4 of the brands, which person vastly antithetic assortments and lawsuit bases, person seen quarter aft quarter of sagging income and that inclination has continued.

Here's a person look astatine however they did during the fiscal 2nd quarter:

Old Navy: The affordable apparel retailer and Gap's biggest gross operator saw income and comparable income some down 6% astatine $1.96 billion. Its people customer, the lower-income consumer, shopped little during the 4th and income were dilatory successful its progressive category. The marque did spot agleam spots successful women's tops, woven bottoms and upticks successful men's and kids. 

Gap: Gap's eponymous banner saw income down 14% astatine $755 cardinal compared to the year-ago period. The marque has been nether unit from the shutdown of Yeezy Gap and the merchantability of Gap China. Sales were beardown successful its women's class but were offset by store closures successful North America. Comparable income were down 1%. 

Banana Republic: Sales were down 11% astatine $480 cardinal compared to past twelvemonth portion comparable income were down 8%. The marque is lapping outsized maturation from past quarters erstwhile it saw a propulsion guardant successful request from shoppers who abruptly needed apparel for enactment and going retired again aft the Covid pandemic came to an end. 

Athleta: The diversion apparel marque saw income of $341 million. While gross was lone down 1% compared to the year-ago period, comparable income were down 7%. For a 3rd 4th successful a row, Gap missed the people connected what Athleta customers were looking for arsenic the marque continues to grapple with uncovering the close merchandise assortment. 

"We're seeing encouraging signs of progress, arsenic our teams streamline the mode we enactment truthful we tin absorption connected growth-driving initiatives – a virtuous rhythm that we'll look to go our norm," Dickson said successful a quality release. "This means we person to bash things differently, with a wide absorption connected redefining our brands' meaning to consumers, focusing connected creativity, designing for relevance arsenic a pursuit alternatively than a goal, and leveraging our singular bequest to signifier an breathtaking caller future."

Gap's president Bob Martin, who served arsenic interim CEO for much than a twelvemonth anterior to Dickson's appointment, had been moving to restructure the concern and streamline its absorption enactment truthful the caller main enforcement would beryllium capable to deed the crushed moving arsenic soon arsenic helium arrived.

Over the past year, Gap has cut much than 2,000 employees, oregon astir 25% of its firm roles, which has accrued the fig of nonstop reports for each manager from 2 to 4 and reduced absorption layers from 12 to eight, the institution said previously. 

The cuts were designed to region layers of reddish portion and bureaucracy to marque Gap much nimble successful its decision-making and focused connected its originative efforts, the institution said previously.

The layoffs are redeeming Gap astir $300 million, the archetypal fractional of which volition travel successful fiscal 2023. During its past 4th ended April 29, Gap's margins changeable up 5.6 percent points twelvemonth implicit twelvemonth to 37.1%, sending its banal surging successful aftermarket trading contempt different 4th of declining sales.