Gap earnings falls short but ‘optimistic’ about Q4; online sales up 61%

Gap Inc. reported third-quarter earnings that just missed Wall Street expectations amid strong performances from both Old Navy and Athleta.

Similar to many other retailers, the company, citing the “high level of uncertainty in the marketplace,” did not provide a fiscal year earnings outlook. 

“The widely-noted recent rise in COVID-19 cases remains a concern, which may impact store traffic,” Gap stated. “However, with rapidly growing online sales contribution, at over 40% of company sales in the quarter, and the opportunity for market share gains, supported by the significant investment in marketing, the company remains optimistic for the fourth quarter.”

The apparel retailer earned $95 million, or $0.25 a share, in the quarter ended Oct.31, compared with $140 million, or $0.37 a share, in the year-ago period. Analysts had expected earnings of $0.27 per share.

Net sales were flat at $3.99 billion, beating estimates of $3.82 billion. Store sales fell 20%.

Online sales increased 61%, accounting for 40% of the quarter’s total sales. Gap said it added more than 3.4 million new customers online.

Total comparable sales rose 5%, fueled by online. By brand, comparable sales rose 17% at Old Navy and declined 5% at Gap Global. Comparable sales were down 30% at Banana Republic. As previously reported, Gap expects to close about 30% of its Gap and Banana Republic stores in North America by the end of fiscal 2023.

Comparable sales rose 37% at Athleta, the highest in the brand’s history. The company said its mask business helped to bring in new customers to Athleta.

Gap said it ended the quarter with $2.6 billion in cash and equivalents, compared with $1.1 billion in the year-ago quarter. 

For the fourth quarter, it expects sales at or slightly higher than last year's fourth quarter, which came in at $4.7 billion.