Gap Inc.’s turnaround efforts appear to be gaining ground based on its first-quarter results.
The apparel retailer swung to a profit of $166 million, or $0.43 per share, from a loss of $932 million, or $2.51 per share, in the year period. Excluding one-time charges associated with the sale of Janie & Jack and Intermix, Gap earned $0.48 per share during the quarter, which past an expected loss of $0.05 per share.
Total revenue increased to $3.99 billion from $2.11 billion a year earlier, when the retailer’s stores were temporarily closed amid the pandemic. Analysts had an estimated revenue of $3.45 billion.
By brand, Old Navy, comparable sales rose 35% year-over-year and were up 25% versus 2019. Athleta’s comparable sales rose 27% from last year, and increased 46% on a two-year basis. (The two brands accounted for 66% of company-wide sales in the first quarter.) Banana Republic’s comparable sales fell 4% year-over-year and were down 22% versus 2019.
At Gap’s namesake banner, comparable sales globally grew 29% year-over-year but were down 1% on a two-year basis. But the brand’s comparable sales in rose 9% from 2019.
Online sales grew 82% from the first quarter of 2019 and represented 40% of total sales. Store sales declined 16% versus the first quarter of 2019, which the retailer attributed primarily due to strategic closures and COVID-19 closures outside of the U.S.
“Our Power Plan 2023 is taking hold," said CEO Sonia Syngal. "Investments in demand-generation, coupled with macro tailwinds, supercharged our brands. Gap Inc. delivered sales growth of 8% over 2019 pre-COVID levels, with particular strength at Old Navy and Athleta, a healthy and growing Gap business in North America, and market share gains that outpaced the industry. As store traffic came back, we sustained our digital dominance with 82% online growth versus 2019."
Unveiled last fall, the company's "power plan" is a three-year strategy that involves putting its resources behind the growth and potential of its billion-dollar brands Old Navy, Gap, Banana Republic and Athleta. Earlier this month, the retailer entered into an agreement to sell its upscale Intermix brand. The deal came on the heels of Go Global Retail’s acquisition of Gap’s premium children’s wear brand, Janie and Jack.
In remarks about the first quarter, Syngal said that while active and fleece continue to soar, there was also a resurgence in summer fashion with dresses rebounding, "showing that customers are emerging from the crisis wanting to express their style without sacrificing the comfort and digital convenience they’ve become accustomed to."
Based on its strong first-quarter results, Gap is now expecting adjusted earnings to be in a range of $1.60 to $1.75 per share this year, with net sales rising in the low- to mid-twenty percent range from 2020. Previously, the company was looking for mid- to high-teens percentage sales growth.