Skip to main content

Gap beats Street by swinging to profit, misses with sales in Q2

Gap Inc. had a mixed second quarter.

Gap Inc. reported declining sales across all its brands for its second quarter even as it swung to a profit that topped Street estimates.

The department store retailer reported net income of $117 million, compared to net loss of $49 million in the second quarter of fiscal 2022 and ahead of Wall Street projections. Earnings per share (EPS) were $0.34 adjusted for one-time closing costs, compared to a loss per share of $0.13.

However, Gap missed analyst expectations with net sales of $3.55 billion, down 8% year-over-year from $3.6 billion. Net sales results included an estimated one-percentage-point foreign exchange headwind and two percentage points of negative impact from the sale of Gap China.

Comparable sales were down 6%. Online sales decreased 11% compared to the prior year and represented 33% of total net sales. Gap Inc. ended the quarter with 3,456 store locations in over 40 countries, of which 2,592 were company operated.

Following are quarterly highlights by individual banner:

Old Navy

  • Net sales of $1.96 billion, down 6% compared to prior year. Strength in women's tops and woven bottoms and improved trends in men's and kids were offset by softness in the active category as well as continued slower demand from the lower-income consumer. Comparable sales were down 6%.


  • Net sales of $755 million, down 14% compared to the previous year. Excluding the negative impact from the sale of Gap China, the shutdown of Yeezy Gap and foreign exchange headwinds, net sales were down 4% versus the second quarter of fiscal 2022. Sales were driven by continued strength in the women's category offset by strategic store closures in North America. Comparable sales were down 1%.

Banana Republic

  • Net sales of $480 million, down 11% year-over-year. While Banana Republic maintained market share in the quarter, Gap Inc. says sales growth remains impacted in the short-term as the brand laps the outsized growth in 2022 driven by the shift in consumer preferences. Comparable sales were down 8%.


  • Net sales of $341 million, down 1% compared to the prior year. While sales continue to be impacted by product acceptance challenges, the brand has taken near-term actions to improve product presentation and creative. Comparable sales were down 7%.

Looking ahead, Gap Inc. estimates that third quarter net sales could decrease in the low double-digit range compared to net sales of $4.04 billion. Third quarter 2022 net sales included approximately $70 million in sales for Gap China.

The company anticipates that fiscal 2023 net sales could decrease in the mid-single-digit range compared to fiscal 2022 net sales of $15.6 billion. Fiscal 2022 net sales included approximately $300 million in sales for Gap China. Fiscal 2023 will include a 53rd week, estimated to positively impact net sales by $150 million.

"As we look toward the long-term, we believe our focus on unlocking the value of our important and iconic brands coupled with the transformative actions we are taking to improve our operating structure will position Gap Inc. back on its path towards delivering sustainable, profitable growth and value for our shareholders," said Katrina O'Connell, executive VP and CFO, Gap Inc.

“I have long admired Gap Inc. as a customer, a brand builder, and most recently, as a board member. An even greater draw is the company's storied brands. And I'm excited for the opportunity to lead the incredible people of Gap Inc. to unlock our full potential," said Richard Dickson, president and CEO, Gap Inc. "We're seeing encouraging signs of progress, as our teams streamline the way we work so we can focus on growth-driving initiatives – a virtuous cycle that we'll look to become our norm. This means we have to do things differently, with a clear focus on redefining our brands' meaning to consumers, focusing on creativity, designing for relevance as a pursuit rather than a goal, and leveraging our remarkable legacy to shape an exciting new future."


This ad will auto-close in 10 seconds