Gap forecasts weak sales on slow consumer spending, rising competition
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Gap has been battling declining sales at all its brands as customers move away from outdated product assortments, mainly at its namesake brand and Old Navy.
PHOTO: BLOOMBERG
NEW YORK – Gap on Thursday forecast a steeper-than-expected decline in current-quarter sales hit by slowing demand for its accessories and apparel, and warned it was losing market share to rivals including Shein, Amazon and T.J. Maxx.
Gap missed revenue expectations for the second quarter, echoing weak trends from companies such as Macy’s and Foot Locker, in fresh signs that United States consumers may be spending less on discretionary items in an uncertain economy.
“Some of the brands that are really winning with our consumers are T.J. Maxx, Amazon and Shein. We are definitely seeing those businesses gaining share,” Gap finance chief Katrina O’Connell said on a conference call, responding to an analyst’s question on how Gap’s cheaper-priced brand Old Navy was faring against competition.
Gap has also been battling declining sales at all its brands as customers move away from outdated product assortments, mainly at its namesake brand and Old Navy.
In July, Gap tapped former Mattel chief operating officer Richard Dickson to head the company after a year-long search, betting on the executive’s success in turning around the Barbie brand to revive sales at the apparel retailer.
“Old Navy and Gap have been very inconsistent with their products and their strategy,” said Ms Jessica Ramirez, a senior analyst at Jane Hali and Associates, adding that solid strategy and more compelling products are expected with the new chief executive.
Shares of Gap were up 1.7 per cent in extended trading after the company crushed profit expectations, benefiting from restructuring efforts, lower freight expenses and fewer promotions at its apparel brands.
The company has been closing underperforming Gap and Banana Republic stores to save on costs and eliminated more than 2,000 jobs to shield its margins.
Gap expects third-quarter net sales to decrease in the low double-digit percentage range, compared with analysts’ expectations of a 6.76 per cent decline, according to Refinitiv data.
The company now expects fiscal 2023 net sales to decrease in the mid-single-digit percentage range, compared with a previous forecast of a low- to mid-single-digit percentage decline.
Net sales fell 8 per cent to US$3.55 billion (S$4.8 billion) in the second quarter, missing analysts’ average estimates of US$3.57 billion.
On an adjusted basis, Gap earned 34 US cents per share for the quarter ended July 29, compared with estimates of 9 US cents. REUTERS
