Gap (GPS) reports Q1 2020 net loss, shares fall

Gap Inc.‘s first-quarter sales fell 43%, the clothing maker reported Thursday, as its stores were shut for much of the period due to the coronavirus pandemic. 

Chief Executive Sonia Syngal said in a statement that sales continued to decline into May, after the first quarter ended, but the retailer had online growth of more than 100% during the month. 

As of Thursday, more than 1,500 stores are back open for business in North America, Syngal said, which is about 55% of the company’s base and is ahead of schedule. Gap is planning to have most of its stores reopened this month, she said. And reopened stores are averaging sales of about 70% their normal levels, with the Old Navy brand driving that rebound, the company said. 

However, 20 of Gap’s stores have sustained “extensive damage” due to the looting that has broken out amid nationwide protests for the death of George Floyd, the CEO said during a post-earnings call with analysts. She said the company is working to get those locations back open as quickly, and safely, as possible. 

Gap shares were falling around 4.5% in after-hours trading on the news. 

Here’s how the company did during its fiscal first quarter ended May 2: 

  • Loss per share: $2.51 
  • Revenue: $2.11 billion 

Gap reported a net loss of $932 million, or $2.51 per share, compared with a profit of $227 million, or 60 cents a share, a year ago. 

The loss included a $484 million writedown on store and operating lease assets, along with an inventory impairment charge of $235 million. 

Net sales fell to $2.11 billion from $3.71 billion a year ago. It said e-commerce sales were up 13% year over year during the quarter. 

The company did not break out its same-store sales due to the temporary store closures. 

Analysts were calling for Gap to lose 67 cents per share on revenue of $2.3 billion, according to Refinitiv data. However, it is difficult to compare reported earnings with analyst estimates for the quarter because of the impact of the pandemic. 

Sales for Gap’s namesake brand were down 50%, while Old Navy sales were down 42%, Banana Republic sales fell 47%, and Athleta sales dropped 8%. 

Some of these brands fared much better online, however. Athleta, which sells workout gear such as leggings and sports bras for women, saw growth of 49% online, the company said. Old Navy, a value-oriented apparel brand for families, saw online sales rise 20%. Banana Republic’s online business was down 2% during the quarter, while Gap’s digital revenue dropped 5%. 

“Prior to the onset of the pandemic, Gap brand performance continued to be pressured by inconsistent execution of product and marketing messages,” the company said. 

It also said it is working to make Banana Republic, typically an outlet for people to buy clothes to wear to the office, more relevant as more consumers are working from home. 

Gap ended the quarter with $2.2 billion in merchandise inventory, down about 1% from a year ago, it said. To offload seasonal merchandise, the company…

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