Gap Inc Slashes Full-Year Forecast as Global Comps Plunge

Clothing retailer Gap Inc (NYSE:GPS) issued a weak full-year outlook today, amid struggling sales at its Gap, Banana Republic, and Old Navy stores.

The San Francisco-based company posted Q2 net income of $0.60 per share, narrowly beating Wall Street’s view of $0.59. Revenue fell 1.2% from last year to $3.85 billion, also beating estimates for $3.78 billion.

Gap also reported the following comparable store sales performance for Q2:

  • Gap Global: -3% drop, improving on -6% last year.
  • Banana Republic Global: -9% drop, worse than -4% last year.
  • Old Navy Global: Flat, worse than a +3% gain last year.

Looking ahead, GPS forecast full-year 2017 earnings to range from $1.87 to $1.92, down significantly from its prior $2.20 to $2.25 forecast, and much lower than the Wall Street consensus estimates of $1.96.

From the press release:

“During the quarter, we took critical steps to execute our restructuring plans and to build a more efficient global brand model with greater potential for growth,” said Art Peck, chief executive officer, Gap Inc. “While I remain unsatisfied with the pace of improvement across the business, I am encouraged by the underlying signs of progress in Q2, as demonstrated by healthier merchandise margins. Our management teams share my urgency to create fundamental change that will drive long term performance.”

GPS-2016-08-18

Despite the weak 2017 outlook, investors had a muted reaction to today’s report. Gap shares were down just $0.18 (-0.70%) to $25.70 in after-hours trading.

Prior to today’s report, the stock had gained 4.78% year-to-date, trailing the 7% return of the S&P 500 in the same period.

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