A man walks past a store in New York City on January 12, 2021.
Angela Weiss | AFP | Getty Images
Gap Inc. on Thursday predicted a rebound in sales growth in 2021, hoping customers will soon return to their stores and spend more money on apparel as they try to resume some social activities.
Shares rose more than 3% in after-hours trading.
The apparel maker reported fourth-quarter sales that fell short of estimates as the ongoing coronavirus pandemic forced stores to close in Europe, parts of Asia and Canada. However, thanks to its efforts to sell more goods at full price and make progress, the company made a profit.
The Old Navy and Athleta brands, which focus on basics and exercise equipment, showed continued strength. However, the Gap brand of the same name and the Banana Republic label recorded a further quarter of the decline in sales.
For the quarter ended Jan. 30, Gap reported net income of $ 234 million, or 61 cents per share, compared to a loss of $ 184 million, or 49 cents per share, last year.
The last period’s earnings included a tax gain of around 45 cents per share and an impairment loss of around 12 cents per share related to Gap’s Intermix business. According to a survey by Refinitiv, analysts had asked for earnings of 18 cents per share. It wasn’t immediately clear whether analysts had considered the impact of these items.
Net sales decreased 5% from $ 4.67 billion a year ago to $ 4.42 billion. That didn’t match analysts’ estimates of $ 4.66 billion.
Gap’s sportswear brand Athleta in the same store grew 26% year-over-year and Old Navy increased 7%. However, Gap’s eponymous brand saw sales drop 6% in the same store, and Banana Republic announced that its key metric is down 22%. In-store sales is an important metric for retailers who track performance online and in stores that have been open for at least a year.
According to Gap, total online sales increased 49%, representing 46% of net sales for the quarter.
For fiscal 2021, the company is calling for an increase in net sales in mid-to-senior teens compared to 2020. This assumes the effects of Covid will continue into the first half of 2021 and the retailer will return to a normalized prior-year level – pandemic sales level in the second half, the company said.
According to Refinitiv, analysts called for sales growth of 14.1% compared to the previous year.
Earnings are expected to be between $ 1.20 and $ 1.35 per share. Analysts had expected earnings of $ 1.28 per share.
One limitation, however, is still overcrowded US ports, which results in inventory staying in transit for long periods of time. Gap said the port’s congestion is expected to continue into the first half of the year. As a result, inventory levels are expected to continue growing in the second quarter compared to last year in the high single digits.
Gap plans to open 30 to 40 Old Navy stores and 20 to 30 Athleta stores this year. And around 100 Gap and Banana Republic stores will be closed worldwide.
Gap stocks are up about 75% in the past 12 months. The company has a market capitalization of $ 9.46 billion.
The full press release from Gap can be found here.
