Gap Shares Jump After Retailer Reports Big Improvement in Margins

The Gap logo appears at a Gap shop in Los Angeles on April 25, 2023.

The company lost $18 million in the three months that ended on April 29. This compares to a loss last year of $162 millions, or 44 cents per share. Although the company acknowledged that it had been long overdue, they said work was well underway. Athleta's CEO Mary Beth Laughton has left the company, and its role as chief growth officer was eliminated. The company explained that online sales, which accounted for 37% of all net sales, dropped 9% over the past year. This is because the sales trends are now more in line historically, after the Covid Pandemic caused an industry-wide increase in ecommerce. Gross margins have increased by 5.6 points to 37.1%. Net sales for Gap, which makes up the majority of its revenue, fell 1%, to $1.8 billion, and comparable sales decreased 1%. The women's section saw strong sales, but these were offset by a slowdown in the active and kid's categories and a general decline in consumer demand. The company reported sales of $692 million, a drop of 13% year-over-year, but a slight increase in comparable sales. The eponymous brand also experienced a strong women's section and a softening in the active and kid's categories. Sales were $432 million, down 10% from the previous year. The company blamed the decline on a "outsized" 24 percent increase in sales during the previous year, which was driven by the shift in consumer preference as more people returned to work after Covid's lockdowns. The company is still not delivering what the consumer wants. Net sales dropped to $321m, a 11% decline year-over-year, while comparable sales fell 13%. Gap's outlook for the full year was similar to what it said in March. The company's recent sale of Gap China has a significant impact on the outlook. The company anticipates that gross margins will continue to increase and capital expenditures will fall to between $500 million and $525 million. This is a reduction from the previous range of $500 to $550 millions. Full earnings release
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