Shares of Gap Inc. skyrocketed more than 12% in the aftermarket Thursday after the retailer took Wall Street by surprise, narrowing its GAAP loss and earning a penny a share on an adjusted basis in its first quarter when analysts expected another loss.
Gap
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lost $18 million, or 5 cents a share, in the first quarter, compared with a loss of $162 million, or 44 cents a share, in the year-ago quarter.
Adjusted for one-time items, the company earned 1 cent a share. Analysts polled by FactSet expected a loss of 16 cents a share, which would be a second straight adjusted quarterly loss for Gap.
Sales fell 6% to $3.28 billion, meeting FactSet consensus and in line with company’s expectations for a mid-single-digit decline in the quarter. Same-store sales were down 3%, with both in-store and online sales also falling.
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Gap continues to take “necessary actions” to turn around its business, interim CEO Bob Martin said in a statement.
“While the macro and consumer environment remain uncertain, [first quarter]
underscores our ability to deliver improvements to the business including share gains at Old Navy and Gap brand,” he said.
Net sales for the namesake Gap brand fell the most, down 13%, as Gap smarted from the sale of its Gap China business, the shutdown of Yeezy Gap — its collaboration with Ye, the rapper formerly known as Kanye West — and headwinds from a strong dollar.
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Chief Financial Officer Katrina O’Connell said the company was “well positioned” to expand its margins and improve cash flow despite the ongoing “uncertain macro and consumer environment.”
Gap said that second-quarter sales could fall in the mid- to high-single digits, as compared with second-quarter 2022’s sales of $3.86 billion, which included about $60 million in sales from Gap China.
The company kept its expectations for a drop in fiscal 2023 sales in the low- to mid-single-digit range, as compared with last year’s net sales of $15.6 billion. Fiscal 2022 sales included about $300 million in sales from Gap China.
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Gap tweaked its capital-expenditure outlook for the year to a range between $500 million and $525 million, from a previous range between $500 million and $550 million. That’s to reflect lower capital-project investments and fewer Old Navy and Athleta store openings than previously expected, it said.
Shares of Gap have lost 30% in the past 12 months, and 34% so far this year. That contrasts with gains of around 4% and 8%, respectively, for the S&P 500 index
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