Gap Shares Slide 13% After Old Navy Misses Sales Targets and Guidance Trimmed

Sales at Gap’s flagship brand Old Navy fell short of expectations in the fiscal first quarter, prompting the retailer to lower its sales outlook on Thursday.

Old Navy’s comparable sales rose 1% in the quarter, below the 3% analysts had forecast, according to StreetAccount.

As a result, Gap now expects company‑wide comparable sales growth of 1% to 2% for the year, narrowed from its prior 2%–3% range.

Despite the weaker sales outlook, Gap lifted its profitability guidance, projecting adjusted earnings per share of $2.30 to $2.40, up from the earlier $2.20 to $2.35 range.

Gap’s stock fell nearly 10% in after‑hours trading following the announcement.

In a CNBC interview, CEO Richard Dickson said the slump was tied to a spring‑summer assortment that failed to resonate with shoppers, rather than broader macroeconomic issues.

“It’s not a consumer issue,” Dickson remarked. “We’re winning across low, middle, and high‑income cohorts. When the product‑price mix is right, customers are there, but our seasonal categories got off to a weak start.”

He noted that Old Navy’s dresses and swim shorts underperformed, while activewear, denim and kids’ items remained strong.

Key financial results for the fiscal first quarter versus Wall Street expectations (LSEG survey):

• Earnings per share: 38 cents adjusted vs. 37 cents expected
• Revenue: $3.50 billion vs. $3.52 billion expected

Reported net income for the three‑month period ended May 2 was $339 million, or 90 cents per share, up from $193 million (51 cents per share) a year earlier. Excluding one‑time items related to a legal settlement, adjusted earnings were 38 cents per share.

Revenue rose to $3.50 billion, a slight increase from $3.46 billion a year ago.

CFO Katrina O’Connell credited the higher earnings forecast to favorable tax rates and interest income. The company anticipates an $80 million benefit from reduced tariff rates but has chosen to reserve the amount—half to offset higher fuel costs and half for potential promotional spending.

Performance by brand:

Gap: Comparable sales surged 10%, far outpacing the 5.5% analysts expected. Overall sales grew 10% to $796 million, driven by strong marketing and demand in denim, fleece and kids’ categories.

Banana Republic: Comparable sales rose 2% versus the 4% forecast, with overall sales up 1% to $431 million. This marks the fourth consecutive quarter of positive comparable sales. Former PVH Americas CEO Donald Kohler was recently named the brand’s new CEO.

Athlete: The athleisure line continued to struggle, with comparable sales down 11% and overall sales down 12%. New CEO Maggie Gauger, a Nike veteran, is streamlining the assortment, and Dickson expects improvement in the second half of the year.

Old Navy: Sales reached $2 billion, a 1% increase, with comparable sales also up 1% but missing expectations.

Source link