Gap Inc. beats Street, ups outlook; holiday off to ‘strong start’
Gap Inc. reported third-quarter earnings that easily topped estimates amid signs that its turnaround is starting to take hold.
Under the leadership of Richard Dickson, who took the reins as Gap CEO in August 2023, the apparel retailer has been focused on improving its products, brand positioning and marketing. It also is working to improve its stores with refreshes and remodels.
In a statement, Dickson said that all of Gap’s banners gained market share during the quarter.
"Holiday is off to a strong start and we remain focused on executing with excellence in the fourth quarter,” he said. “Our performance year-to-date gives us the confidence to raise our full year outlook for sales, gross margin and operating income growth."
On the earnings call, Dickson said that the company’s namesake brand is “moving again” with trend-right products, big ideas and culturally relevant messaging. He also said the company overall had picked up more middle and higher-income shoppers looking for deals.
Net income totaled $274 million, or $0.72 a share, for the quarter ended Nov. 2, compared with $218 million, or $0.58 a share, in the year-ago period. Analysts had expected earnings of $0.59 a share.
Operating income rose to $355 million last quarter from $250 million in the year-ago period. Total revenue rose 2% to $3.83 billion, topping estimates of $3.81 billion Total same-store sales rose 1%.
Here are Gap’s results by brand:
•Old Navy: Net sales rose 1% to $2.2 billion. Comparable sales were flat. Gap noted that the brand’s continued focus on operational rigor and brand reinvigoration drove solid performance in the quarter, despite lapping tougher compares and facing weather-related headwinds.
•Gap: Net sales rose 1% to $899 million. Comparable sales were up 3% representing the fourth consecutive quarter of positive comparable sales at the brand.
•Banana Republic: Net sales rose 2% to $469 million. Comparable sales were down 1%. The brand, which saw strength in its men's business during the quarter, remains focused on “fixing the fundamentals,” Gap said.
•Athleta: Net sales rose 4% to $290 million. Comparable sales were up 5%. Gap noted that the brand’s new product and marketing are resonating with customers,” Gap said.
"I'm proud that Gap Inc. delivered another successful quarter, growing net sales for the fourth consecutive quarter and gaining market share across all brands while meaningfully expanding operating margin," stated Dickson. "Consistent execution of our strategic priorities, including the rigor and repetition we're applying to our brand reinvigoration playbook, is making us a stronger company and demonstrates our continued progress in unlocking Gap Inc.'s full potential."
Gap said it now expects fiscal 2024 sales to rise between 1.5% and 2%, compared with previous guidance of “up slightly,” or under 1%. It also expects that gross margins and operating income will grow more than it previously forecast.
Gap operated a total of 3,560 stores at the end of the quarter (2,562 company-operated. 998 franchise), which includes 1,243 Old Navy North America stores and 472 Gap North America stores.
