Gap Inc beat Wall Street estimates on sales and quarterly profit on Thursday, helped by steady demand from wealthy consumers for its formalwear and gowns despite a rise in inflation, sending its shares up about a quarter. 10 percent in the extended negotiation.
People prefer more formal wear, dresses, knitted tops and pants, ditching casual wear like T-shirts and shorts as they return to travel, work and social occasions after two years of pandemic-induced restrictions.
Gap’s Banana Republic, an affordable luxury brand, posted an 8 percent increase in sales, while its Old Navy brand, which has been struggling with old-fashioned clothing, posted a 2 percent increase.
However, Gap echoed retailer Kohl’s, which on Thursday warned that high prices for basic goods had slowed spending by low-income consumers on non-essentials such as clothing.
It expects fourth-quarter net sales to fall by mid-single digits, compared with analyst expectations for a 0.6 percent decline, according to Refinitiv IBES data.
“We saw strong volume in October that slowed down a bit at the end and a bit of a slow start in November,” CFO Katrina O’Connell said on a post-earnings call.
Gap is expected to continue to struggle over the next 12 months due to its low-to-middle-income consumer base and underperforming brands, said Zachary Warring, equity analyst at CFRA Research.
Heading into the holiday season and 2023, discounts could continue for brands like Gap due to weaker consumer sentiment, he added.
The company reported $53 million in impairment charges related to the Yeezy Gap. In October, Gap removed products from its Yeezy Gap line created in partnership with Kanye West and shut down YeezyGap.com following the rapper’s anti-Semitic comments.
Gap’s third-quarter net sales rose 2.5 percent to $4.04 billion, beating analyst estimates of $3.8 billion. Excluding items, it posted a profit of 38 cents per share, compared with expectations for a breakeven.
By Granth Vanaik and Ananya Mariam Rajesh; Editing: Maju Samuel
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Source: news.google.com