Gap (GAP) is showing signs of revival.
Second-quarter sales rose 5% to $3.72 billion, compared to expectations of $3.63 billion, and adjusted earnings per share were $0.54, compared to expectations of $0.40. Same-store sales increased 3%, exceeding expectations for a 2.87% increase.
“Our general view of consumer and macroeconomic conditions remains largely unchanged” amid global uncertainty, Chief Executive Richard Dixon said on an earnings call.
The company reiterated its forecast for a slight increase in sales in fiscal 2024.
Gap suspended trading after announcing its second-quarter results on its website around 9:30 a.m. ET on Thursday, then withdrew it. The company originally planned to report after the market closed.
A Gap spokesperson said the results were incorrectly posted on the company’s website due to an administrative error, and the company notified the New York Stock Exchange and suspended trading.
The company has since republished its figures and resumed trading. The stock ended the day up 2%.
The company’s stock is up more than 10% year-to-date, which compares favorably with rival Abercrombie & Fitch (ANF)’s 62% rise.
Sales increased for two consecutive quarters as the company worked to revitalize its brand.
Old Navy and its namesake Gap brand led the growth, with same-store sales up 5% and 3%, respectively.
Dixon, whose brand focuses on contemporary style, said the results “really show that our customers are responding well to our brand revitalization efforts.” He added that the company is “declaring Gap to be the end of the baggy, oversized trend.”
Banana Republic recorded flat sales growth as it plans to focus on “fixing the fundamentals” and working to improve its “pricing and assortment architecture.”
Sales of the company’s premium lifestyle brand Athleta fell 4%. The company expects the brand’s same-store sales to return to positive growth for the remainder of this year.
Chief Financial Officer Katrina O’Connell said of premium brands: “There are a lot of different outcomes to the magnitude of the recovery in the third quarter, so we’ll see where that lands.” Ta.
The 55-year-old retailer has been working on a turnaround, including changing its ticker symbol on the New York Stock Exchange last week.
As Brian Sozzi reported, it became “GAP” rather than an homage to the navigation system “GPS.”
“We’re spending a lot of time driving our strategic priorities, bringing back financial and operational rigor, reinvigorating these brands and revitalizing them to the extent that they can be part of the cultural conversation. ” said former COO Dixon. toy maker Mattel told Yahoo Finance.
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“Great products, great prices, great storytelling, great store experience. These are all fundamentals that we’re working hard to fix.”
July 13, 2024 at the GAP Store in Times Square, New York City. (Beata Zawrzel/NurPhoto via Getty Images) · NurPhoto via Getty Images
Gross profit margin also exceeded expectations, reaching 42.6%. According to the release, the company increased its product margin by 410 basis points year-over-year due to lower product costs and improved promotional efforts.
Gap expects net sales to increase slightly in the third quarter of 2023, with gross margins expanding by 50 to 75 basis points.
Ahead of the results, analysts were focused on whether Gap could succeed in a tense consumer environment.
“Middle-income consumers continue to be squeezed,” Bernstein analyst Aneesha Sherman told Yahoo Finance.
“Time and time again, the middle class is being hit hard by a combination of inflation, student loan repayments, credit card debt, the complete loss of savings due to the pandemic, and a lack of improvement in overall sentiment. These consumers are now looking for value…and are becoming more selective. ”
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“We are all working against a backdrop of macroeconomic uncertainty,” Dixon told Yahoo Finance, adding that while Gap remains vigilant about consumer tracking, “there are There’s always a winner,” he added.
Morgan Stanley analyst Alex Stratton rates the stock “overweight,” but expects second-half earnings to be better given “increased confidence” in Dixon’s strategy and implementation of the turnaround. There is.
CFRA analyst Zachary Walling was less optimistic, reiterating his sell rating in a recent note, reflecting a “very competitive specialty apparel retail market” primarily focused on youth. It says that it is.
He said “sensitivity to economic conditions” and reduced foot traffic at shopping malls could also impact retailers.
Here’s how Gap reported compared to Wall Street’s expectations, according to Bloomberg Consensus.
Adjusted earnings per share: $0.54 vs. $0.40
Revenue: $3.72 billion vs. $3.63 billion
Same-store sales growth rate: 3% vs. 2.87%
Old Navy: 5.00% vs. 4.76%
Gap: 3.00% vs. 4.09%
Banana Republic: 0.00% vs. 1.62%
Athleta: -4.00% vs. -4.03%
The company reiterated its outlook for ending 2024 with slightly higher sales growth on a 52-week basis.
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Brooke DiPalma is a senior reporter at Yahoo Finance. Follow her on Twitter @brooke di palma Or email bdipalma@yahoofinance.com.
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