Gap posts big loss as sales fall 43% amid pandemic
Gap Inc. swung to a $932 million net loss in its first quarter as its stores remained dark for much of the period.
In a statement, CEO Sonia Synga said that while net sales and store sales continued to reflect material declines in May as a result of closures, the company saw more than 100% growth in online sales during the month.
“This online momentum, enabled by new omni-capabilities that have expanded the way customers can shop with us, leaves us well-positioned to fuel our brands going forward,” she said.
The apparel giant currently has 1,500 -plus stores open in North America, and expect to have the vast majority of its North American stores re-opened in June.
“While we are pleased that store traffic and productivity is exceeding expectations, particularly at Old Navy and Athleta, we continue to plan conservatively as significant uncertainty remains ahead,” said Katrina O’Connell, executive VP and CFO Gap Inc.
Gap reported a net loss of $932 million, or $2.51 per share, for the quarter ended May 2, compared with a profit of $227 million, or $0.60 a share, in the year-ago period.
Net sales fell to $2.11 billion from $3.71 billion a year ago. E-commerce sales were up 13% year over year during the quarter. By brand, net sales were down 50% at Gap, with store sales down 64% and online sales down 5%. Net sales were down 47% at Banana Republic, with store sales down 61% and online sales down 2%.
At Athleta, net sales fell 8%, with store sales down 50% and online sales up 49%. At Old Navy Global, net sales fell 42%, with store sales down 60% and online sales up 20%.
The retailer said that, since the onset of the COVID-19 pandemic, Old Navy has seen a meaningful acceleration in its digital business. It expects the off-mall, strip real estate that makes up approximately 75% of the Old Navy fleet to be an advantage as customers return to stores and expects traffic in these locations to ramp up more quickly than other formats.
As part of its response to the pandemic, Gap plans to reduce its capital expenditures for the fiscal year by approximately 50%. It now expects capital spending to be approximately $300 million for the year, which includes about $30 million of expansion costs related to its Ohio distribution center.
“We are optimistic that the actions we've taken will provide a stable foundation as we navigate near-term uncertainty and refashion Gap Inc. for long-term growth,” Syngal said.
Gap ended first-quarter fiscal year 2020 with $1.1 billion in cash, cash equivalents, and short-term investments compared to $1.7 billion at the beginning of the quarter. Cash flow performance was impacted by the sales decline caused by the pandemic, partially offset by $500 million borrowed during the quarter under the company’s unsecured revolving credit facility.
The company ended the quarter with 3,911 store locations in 42 countries, of which 3,313 were company-operated.