Gap misses in Q3; details omnichannel moves

San Francisco – Gap Inc. failed to meet Wall Street expectations for net income and revenue in its third quartet as its namesake brand continues to struggle. The retailer cut its annual forecast as sales at its namesake brand continue to fall,Gap’s net income rose 11% to $351 million from $337 million, helped by lower cost of goods sold and taxes.



Net sales slightly dropped to $3.97 billion from $3.98 billion, impacted by currency fluctuations.Same-store sales fell 2%, with a 5% drop at Gap global stores, flat performance at Banana Republic and 1% growth at Old Navy.

Total online sales did well, increasing 5% to $621 million from $589 million.



In other omnichannel developments, Gap launched reserve in store on Nov. 20 in almost all Athleta stores, making it easy for online and mobile shoppers to reserve items and pick them up at the local store of their choice. Gap also recently extended its order in store capabilities to about 1,000 U.S. Gap, Old Navy, Banana Republic and Athleta stores, allowing customers access to expanded inventory including broader size, color and style selections. The company also launched free customer Wifi in more than 1,100 U.S. Gap, Gap Factory, Banana Republic, Banana Republic Factory, Old Navy and Athleta stores.



Gap plans to open new stores across a variety of its banners. By the end of fiscal 2014, Gap expects to open about 10 new Gap and Gap outlet stores across mainland China, Hong Kong and Taiwan, as well as about eight new Athleta stores in the U.S. In addition, Old Navy will open franchise-operated stores in six Middle Eastern countries beginning in spring 2015.



Following its debut in China earlier in the year, Old Navy announced that it expects to expand its footprint faster than originally planned in mainland China, reaching seven stores in five cities by the end of the fiscal year.



For the full fiscal year 2014, the company continues to expect to open about 185 company-operated stores, focused on China, Old Navy in Japan, Athleta, and global outlet stores. In addition, for the full fiscal year 2014 the company plans to close about 70 company-operated stores, which are weighted toward Gap North America.



“As we move into the holiday season, our teams are focused on delivering unique customer experiences which will differentiate our portfolio of brands in the marketplace,” said Glenn Murphy, chairman and CEO, Gap Inc.



Gap diluted its earnings per share guidance for the full fiscal year 2014.