Gap earnings Q2 2018 shares tumble 

Earnings


Gap Inc. shares are tumbling after the apparel retailer reported same-store sales for its namesake brand after the bell on Thursday that missed analysts’ expectations for the second quarter, overshadowing a beat on earnings and revenue.

The stock was still falling more than 10 percent Friday morning on the news.

CEO Art Peck, who has been at the helm of Gap since 2015, has been working to trim excess inventory and compete with fast-fashion retailers like H&M and Zara. Gap’s other brands include Banana Republic, Athleta and Old Navy, the latter being the company’s strongest growth driver in recent quarter and the biggest division by sales. Gap recently named a new CEO, Neil Fiske, to head up the namesake brand, with the goal of bringing new styles to Gap more frequently and targeting the right shoppers with its jeans and basic tees.

But sales at Gap-branded stores open for at least 12 months fell 5 percent during the second quarter, more than a 2.55 percent drop expected by analysts, according to a survey by Thomson Reuters. Same-store sales at Old Navy, meanwhile, climbed 5 percent, ahead of an expected 4.5 percent increase.

“Opportunity for improvement remains at [the] Gap division, while Old Navy and Banana Republic results were solid,” Cowen & Co. analyst Oliver Chen said in a research note. “With the new Gap brand president and management’s commitment to turn around the business, we think Gap’s mishap will be addressed by the end of the year.”

Net sales for Gap Inc. rose 7.5 percent in the quarter ended TK to $4.09 billion, beating a forecast by analysts for $4.01 billion.

Excluding one-time items, the apparel retailer earned 76 cents per share, 4 cents ahead of analysts’ expectations.

“As I’ve said, we will see continued improvement at Gap Brand as we move through the year and that remains the view,” Peck said on an earnings conference call. “Quarter by quarter, we expect performance to improve and we believe the worst is behind us.”

Peck also said improving Gap’s supply chain continues to be a key focus for the company.

“There’s no question that this is an important factor powering Old Navy’s consistency, Athleta’s growth, and Banana’s continued turnaround,” he told analysts and investors.

Gap shares have fallen about 5 percent so far this year, bringing the retailer’s market cap to roughly $11.3 billion.



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