Gap Inc. swung to a loss in its fourth quarter, but it still managed to beat Street earnings and sales expectations.
Gap, the largest specialty apparel company in the U.S., reported a loss of $16 million, or $0.4 cents per share, for the quarter ended Jan. 29, compared with net income of $234 million, or $0.61 a share in the year-ago period. Earnings adjusted for charges related to strategic changes in its European business, came to a loss of $0.02 per share, less than the $0.14 loss analysts had been expecting.
Net sales increased 2% year-over-year to $4.53 billion, topping estimates for $4.49 billion. Sales were down 3% compared to the same period in 2019, with the company citing store closures.
Same-store sales rose 3% year over year. On a two-year basis, same-store sales were also up 3%.
Gap said it expects to open about 30 to 40 stores each for Old Navy and Athleta in fiscal year 2022. In addition, as part of its previously announced 350 store closure plan, the company expects to close about 50 to 60 Gap and Banana Republic stores in North America during the year.
•Athleta: Fourth quarter net sales were up 52% versus 2019 with comparable sales up 42% versus the fourth quarter of 2019. Fiscal year 2021 net sales were up 48% compared to fiscal year 2019 with comparable sales up 39% versus 2019. The company said Athleta is still on track to hit $2 billion in annual sales by 2023.
[Read More: Athleta turns up heat on rivals with new wellness platform; supports Biles]
•Gap: Fourth quarter net sales declined 13% versus 2019, with permanent store closures contributing an estimated 17 percentage points of decline. Global comparable sales increased 3% with North America comparable sales up 12% versus the fourth quarter of 2019. Fiscal year 2021 net sales were down 12% compared to fiscal year 2019, with permanent store closures reducing sales by an estimated 15 percentage points.
The company said Gap is set to scale the strong partnerships it established in 2021, from Gap Home with Walmart and Yeezy Gap to its joint venture with NEXT in Europe, to further extend the brand’s reach and relevancy around the globe.
•Banana Republic: Fourth quarter net sales declined 11% versus 2019, with permanent store closures contributing an estimated 10 percentage points of the decline. Comparable sales were down 2% versus the fourth quarter of 2019. Fiscal year 2021 net sales were down 18% compared to fiscal year 2019, with permanent store closures reducing sales by an estimated 10 percentage points. Comparable sales for fiscal year 2021 were down 9% versus 2019.
The brand is expanding into new adjacent categories, including BR Baby.
“After two years of restructuring, including divesting smaller non-strategic brands, transitioning our European market to an asset-light partnership model and shedding underperforming North American stores, our core business is strong and we are poised for balanced growth across our four billion-dollar lifestyle brands,” said Sonia Syngal, CEO, Gap Inc. “As our teams address near-term disruption from the acute headwinds that muted our fourth-quarter performance, we are confident in our ability to execute against our long-term strategy, capitalizing on our investments in demand-generation, customer loyalty and artificial intelligence to accelerate profitable growth.”
For the full year, Gap expects to earn between $1.85 and $2.05 per share, on an adjusted basis, with sales growing a low single-digit percentage from 2021. Analysts were looking for annual adjusted per-share earnings of $1.86, with sales up 1.6% from prior-year levels.