Investors became excited about Gap Inc. (NYSE: GPS) earnings because the retailer is in less trouble than a year ago. However, it is still in trouble. Cost cuts rather than improved revenue drove the better numbers. There is nothing to rejoice about in reality. (Customers are abandoning these 25 brands.)
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It is a shame when a company has to brag about mediocrity like Gap did. “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,” said Bob Martin, Gap’s executive board chair and interim chief executive. It is a statement of hope and not reality.
Gap’s sales dropped to $3.28 billion, down 6% from the same quarter a year ago. Comparable store sales declined 3%. Online sales, so critical to most retailers, fell 9%.
Gap’s management was excited that the company only lost $18 million, compared to $162 million. Celebrating a loss is an odd way to promote progress.
All four of Gap’s brands (Old Navy, Gap, Banana Republic and Athleta) had sales that fell in the recent quarter, compared with a year ago. Amid the troubles, Gap has been unable to find a permanent CEO. Perhaps that is because no one wants to risk their career by trying to fix such extraordinary trouble.
Gap’s shares rallied on the news. However, they are down 34% this year and 78% over the past two years.
The Gap rally, which may be brief, is one of hope over experience. Gap has not turned around at all.
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