Skip to main content

Growth slows at Gap’s most important division

Gap Inc. on Thursday reported first quarter earnings and same-store sales that missed Street analysts amid a surprising slowdown at its Old Navy brand. Total sales, however, were better than expected.

Gap’s income totaled $164 million, or 42 cents a share, in the quarter, compared with $143 million, or 36 cents a share in the year-ago period. Analysts had expected earnings of 44 cents.

Net sales rose 10% to $3.8 billion, more than analysts had forecast. (Excluding the impact from the adoption of the new revenue recognition standard, net sales increased 6% compared with last year.)

Total same-store sales edged up 1%, less than the 1.7% increase analysts were looking for. Comparable sales by global brand for the quarter included a 3% rise at Old Navy, compared to an 8% increase last year. (Gap previously announced plans to open 60 Old Navy stores across the U.S. and Mexico in 2018.)

Gap’s same-sales were flat with last year. Same-store rose 3% at Banana Republic versus a 4% decline last year.

“We are pleased to have delivered our sixth consecutive quarter of positive comp growth, despite the expected challenges at Gap brand,” said Art Peck, president and CEO, Gap Inc. “Our balanced growth strategy provides the right foundation to differentiate our portfolio of brands in this retail environment, with strategic investments in value, active and digital fueled by productivity opportunities unique to our scaled operating platform.”

Despite its less-than-stellar results, Gap said affirmed its previous full-year earnings per share guidance of $2.55 to $2.70.

“Despite the pressures we faced in the first quarter, we are affirming our full-year guidance, reflecting our confidence in the underlying fundamentals of the business as well as the benefits of executing against our balanced growth strategy,” said Teri List-Stoll, executive VP and CFO, Gap.

The retailer ended the first quarter 2018 with 3,617 stores in 45 countries, of which 3,171 were company-operated.

This ad will auto-close in 10 seconds