Is Gap Inc. really back on track?

2/26/2016

Gap Inc. says its fourth quarter results show the company's turnaround plan is working, but the retailer continues to post lackluster sales and earnings.



The parent company of Old Navy and Banana Republic says fourth-quarter profits were $214 million, or 53 cents per share, for the three-month period ended Jan. 30. That compares with $319 million or 75 cents per share, in the year-ago period. Revenue dropped nearly 7% in the quarter to $4.39 billion. Same-store sales declined 7%.



"With a year of transition behind us, I’m confident that we have the right strategies in place to fuel our long-term growth,” said Art Peck, CEO, Gap Inc. “We made significant progress in 2015 transforming our product operating model, enabling us to be more responsive to trends and market conditions, and consistently deliver on-brand product collections. Our brands are strengthening their connections with customers through digital, and especially mobile, enhancements that create richer experiences whether shopping online or in stores, or any combination of channels."



Looking ahead, Gap said it expects earnings per share for fiscal 2016 in the range of $2.20 to $2.26 per share.



Gap says its namesake brand made significant progress on its transformation agenda during fiscal year 2015, implementing a clear product aesthetic framework and new product operating model, as well as actions to create a smaller, more vibrant fleet of stores.



Athleta grew its footprint to 120 U.S. store locations by the end of 2015, and is scheduled to open about 15 additional U.S. stores in fiscal 2016. A new category for the brand, Athleta Girl, will launch in this summer.



Same-store sales by global brand for fiscal 2015 were as follows:



• Gap Global: negative 6% versus negative 5% last year

• Banana Republic Global: negative 10% versus flat last year

• Old Navy Global: flat versus positive 5% last year



The company ended fiscal year 2015 with 3,721 store locations in 51 countries, of which 3,275 were company-operated. Square footage of company-operated stores was about flat compared with the end of fiscal year 2014.



In fiscal 2016, the company expects to open about 40 company-operated stores, net of closures and repositions. In line with its strategy, the company said it expects store openings to be focused on greater China, global outlet stores and Athleta.


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