Gap (GPS) reports Q2 2020 loss per share, sales fall 18%

Gap Inc. said Thursday that its total sales fell 18% in the last four years, as e-commerce revenue rose 95% from a year ago, but those gains were offset by a 48% drop in retail sales in the coronavirus pandemic .

It swung to a net loss from a year ago because the lower sales combined with additional shipping costs for all those online orders weighed on profit.

Their shares jumped more than 6% in trading after hours.

Here’s how Gap performed in its fiscal second quarter compared to what analysts expected, based on data from Refinitiv:

  • Loss per share: 17 cents against an expected loss of 41 cents
  • Revenue: $ 3.28 billion versus $ 2.91 billion expected

For the period ending August 1, Gap posted a loss of $ 62 million, or 17 cents per share, a year ago, compared to net income of $ 168 million, or 44 cents a share. That came in better than the 41 cents per share loss predicted by analysts, based on a Refinitiv poll.

Sales fell about 18% to $ 3.28 billion from $ 4 billion a year ago, and analysts expected expectations for $ 2.91 million.

The retailer, which also owns Old Navy and Banana Republic, doubled its e-commerce business in the fourth quarter, said Chief Executive Sonia Syngal, when customers have a base on tees, training shorts and pajama sets. Gap has also sold face masks to protect against Covid-19 – to individual consumers and in bulk to other companies – which is expected to contribute to sales.

Same-store sales, which track sales online and open stores for at least 12 months, were up 13%, the company said, driven by the power of its online business. However, the 13% figure only accounts for the days that Gap stores were physically open for business during the quarter. Gap said it added 3.5 million new digital customers during the period.

Sales at its namesake Gap were down 28%, consisting of a 75% increase online and a 55% drop in stores.

At Old Navy, which is one of Gap’s strongest performing brands of recent times, sales fell by a total of 5%, consisting of 136% growth online and a 36% drop in stores. Gap said its Old Navy stores, located away from shopping malls, perform better than others because they reopen, “and remain an advantage.”

Banana Republic sales fell 52%, consisting of a jump of 26% online and a 71% in stores. This brand, which focuses on offering clothing for men and women to work in, has been at a disadvantage in the pandemic, Gap said. It said it is still working to shift the inventory of Banana Republic to offer more casual fashion.

Within Athleta – Gap’s athletic clothing brand for women that competes with likes of Lululemon and Nike – sales increased by 6%, making Athleta the only division within Gap Inc. was to increase total revenue. Athleta’s online sales increased by 74%, while sales sales were 45%.

Gap ended the quarter with $ 2.2 billion in cash and equivalents on its balance sheet, adding that it is in a “solid financial position to navigate the ongoing pandemic and continue investing in its business.”

It said it recently secured a $ 1.87 billion asset-based revolving credit facility, replacing its previous $ 500 million unsecured revolving credit facility, which it has yet to borrow from and does not expect to access this fiscal year.

However, the company does not currently offer a forecast for 2020, due to the uncertainty of the global pandemic.

As of Thursday, the market shares are down less than 1% year-on-year. It has a market cap of $ 6.5 billion.

Find here the full press release of Gap’s earnings.

This story is developed. Please check for updates.