Why Gap Was Crushed After Q3 Results
Gap took a big hit Wednesday morning after reporting mixed quarterly results after the closing bell on Tuesday.
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Apparel retailer Gap Inc. (NYSE: GPS) reported its fiscal third-quarter financial results after the markets closed on Tuesday. The company said that it had $0.25 in earnings per share (EPS) and $3.99 billion in revenue, while consensus estimates had called for $0.29 per share and $3.82 billion. The same period of last year reportedly had EPS of $0.37 on $4.0 billion in revenue.
During the latest quarter, the company’s comparable sales were up 5%, year over year, driven by the strength of the scaled e-commerce business, which added over 3.4 million new customers in the quarter.
In terms of its segments, the company reported as follows:
- Old Navy Global net sales increased 15%, with comparable sales up 17%. Old Navy continued to experience meaningful acceleration in its online business as strong customer response to product was further bolstered by compelling and relevant digital marketing investment.
- Gap Global net sales were down 14% and comparable sales were down 5%. This reflects a reduced store fleet and lower traffic trends, partially offset by strong online performance.
- Banana Republic Global net sales were down 34%, a slight improvement over the second quarter. Comparable sales were down 30%.
- Athleta net sales were up 35%. Comparable sales were the highest in the brand’s history, an increase of 37%, and online contribution remained above 50% in the quarter.
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Looking ahead to the fiscal fourth quarter, the company expects to see net sales equal to or slightly higher than last year, with a gross margin rate the same as last year. Consensus estimates are calling for $0.32 in EPS and $4.54 billion in revenues for the coming quarter.
Gap’s cash, cash equivalents and short-term investments totaled $2.6 billion at the end of the quarter, up from $1.1 billion at the end of the same period last year.
The company ended the fiscal third quarter with 3,785 store locations in 43 countries. Of these stores, 3,178 were company operated.
Gap stock traded down 17% to $22.25 Wednesday morning, in a 52-week range of $5.26 to $26.99. The consensus price target is $23.30.
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Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.
