Fashion retailer Gap posted weak second quarter results, with net sales declining by 2 per cent to $3.7bn while comparable sales went down by 1 per cent compared to last year.
The business reported an adjusted operating income of $259m with an adjusted operating margin of 7.1 per cent excluding the impact of the tariff recovery. The retailer’s ending inventory was $2.3bn, which was flat compared to the same time last year.
The company’s online sales decreased by 1 per cent year-on-year, and there was a mixed performance across its portfolio of brands, which includes Old Navy, Gap, Banana Republic, and Athleta.
Old Navy’s second quarter net sales decreased by 4 per cent to $2.1bn, which was due to ongoing softness in the women’s seasonal assortment category, according to the business.
Despite the overall decline, the Gap brand experienced a strong net sales growth of 9 per cent year-on-year to $844m.
The robust performance at Gap was boosted by the company’s investment in culturally relevant storytelling across its categories, including denim, which led to a 10 per cent comparable sales growth.
Net sales for the period at Athleta plunged by 12 per cent to $264m, while Banana Republic posted a slight increase of 1 per cent to $478m on an annual basis.
Moving forward, the company has adjusted its outlook and now expects full-year sales to be in the range of between 1 per cent and 1.5 per cent.
The business now forecasted that Old Navy’s comparable sales will be in the range of flat down to 1 per cent based on the weak second quarter performance.
The company has also announced that Old Navy’s CEO is set to leave following the declining sales and will be succeeded by Michael Francis.
Richard Dickson, president and CEO of Gap said: “While top-line results in the second quarter were modestly below expectations, continued operational and financial rigor contributed to gross margin strength, resulting in the company exceeding profit expectations.
“We have work to do at Old Navy, but we have a clear understanding of the factors that impacted performance and are taking targeted actions that are already driving improved results. We remain focused on disciplined execution and performing while we transform in order to win in the second half.”
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