Gap has not been able to get its mix of brands and inventory right for years. It has serially closed stores and shuffled through CEOs. Matters could get worse across the holiday season. A new analysis shows Gap may need to close hundreds of stores.
The analysis of Gap’s trouble was reported by CNN Business as part of an analysis of several troubled retailers. Among these, companies that include Bed Bath & Beyond may not survive at all.
Gap’s recent financial reports indicate how deeply troubled its operations are. In the most recently reported quarter, revenue fell 8% to $3.86 billion. Same-store sales plunged 10%. Even with this sharp drop, Gap has decided to keep open 3,390 stores that house its Old Navy, Gap, Banana Republic, and Athleta brands.
Two things stood out when Gap released its results. The company has counted on its largest brand — Old Navy — as its savior. Its revenue dropped 13% to $2.1 billion. Same-store sales dropped 15%. And, as far as investors are concerned, Gap violated a cardinal rule of earnings announcements. It said it would not provide guidance for the balance of the year. “Given the actions the company has underway and in midst of a CEO transition, combined with the uncertain macro-environment, the company is withdrawing its prior fiscal 2022 outlook.”
Gap shares something with Bed Bath & Beyond. Both need to be turned around by the end of 2022, and both only have interim CEOs.
Gap’s stock has fallen 56% this year. The retailer has less than three months to answer why the shares should not drop more. The holiday season has started for many Americans. Inventories that are too high at many retailers have caused an avalanche of discounts. Price cuts have started to be a race to the bottom. Gap has to contend with larger discount operations like Target, Walmart, and Amazon. These companies also have the balance sheets to carry them through a difficult period.
Gap’s chance to recover has probably come and gone. When results through December 31 are released, Wall St. will know for certain.
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