Gap Earnings Continue to Show a Gap

Gap also reported that its net sales were down by 3% to $3.66 billion from $3.77 billion a year ago. Thomson Reuters had estimates at $3.75 billion. While the -3% reading is bad, this was said to be a decrease of only 1% when compared with last year on a constant currency basis.

Gap indicated that Old Navy had a positive reading of 3% on its comparable sales results. This was said to be on top of three consecutive years of growth, and because customers responded well to Old Navy’s product assortments and marketing campaigns. Still, we already knew that not all was going well. Gap’s total comparable sales for the first quarter were down by 4%, versus a negative 1% a year ago.

Gap showed that its comparable sales by brand (reported globally) for the first quarter were as follows, with a reference versus the prior year’s trend as well:

• Gap Global: -10% versus -5% last year
• Banana Republic Global: -8% versus -1% last year
• Old Navy Global: +3% versus +1% last year

Here were several other key metrics in the Gap report, again for the first quarter:

• Operating expenses were $996 million, down $27 million from first quarter of last year.
• Marketing expenses were $136 million, down $7 million from last year.
• Operating margin was 10.6% in the first quarter, versus 11.7% last year.
• Inventory dollars per store were up about 4% on a year-over-year basis.
• Ended the first quarter with $1.23 billion in cash and cash equivalents.
• Opened 50 and closed 21 company-operated stores.
• Square footage of company-operated stores was up 3% from last year.
• Repurchased 5.6 million shares for $230 million.
• Ended the first quarter with 419 million shares outstanding.

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Art Peck, chief executive officer of Gap, said:

With our leadership team in place, we are making the changes necessary to improve our long-term performance, starting with an intense focus on greater product acceptance. Old Navy’s performance gives me confidence — the team has hit the right formula and they are consistently delivering a truly aspirational experience that’s resonating with customers. Gap remains a top priority as we focus on reestablishing the brand’s aesthetic to bring to life an optimistic and elevated sense of American style.

Gap shares remain under when its same-store sales data was released. Shares closed at $38.56 Thursday and had not really reacted in the after-hours session. Gap has a 52-week trading range of $35.46 to $46.85 and a consensus analyst price target of $42.50.