Gap Shares Down 15 Percent After Missing Earnings Estimates

Shares of Gap Inc are plummeting this week on the heels of the apparel company reporting quarterly earnings and sales fell short of Wall Street estimates, which resulted in the retailer slashing full-year profit outlook. The report indicates that Gap sales were down more than 15 percent in premarket trading, Friday morning, with Thursday’s closing price hitting a new low of $20.60.  

The last time the Gap’s outlook had fallen anywhere near this range was June 2016. 

Gap CEO Art Peck assures that he is “not at all satisfied” with the latest results, adding that this the previous quarter was “extremely challenging.”  Still, he insiss “We are committed to improving our execution and performance this year.”

He goes on to argue that this was among the coldest and wettest winters in recent memory, which often contributes to poor results. This, he says, definitely influenced more shoppers to stay home this year.

In addition, though, the San Francisco-based retailer is really struggling to evolve their product line according to what people are more likely to buy these days. This is arguably far more difficult today than ever before. With high-end fast fashion retailers like Zara—with their lean supply chain—cranking out new designs and products week after week, the Gap is starting to show their age a bit.  Of course, many retailers are moving online—and with online style clubs growing in popularity—any aging retailer is going to struggle. 

Taking a closer look at the actual numbers it is quite easy to see how they are struggling.  For example, The Gap’s adjusted earnings per share was 24 cents, compared against the 32 cents EPS analysts had expected.  Similarly, analysts had expected $3.77 billion in revenue, but the quarterly revenue was only $3.71 billion.  Finally, same-store sales dropped more than expected:  4 percent versus the expected 1.1 percent. 

In the last quarter, The Gap earned $227 million, which is about 60 cents per share.  This is still about forty percent higher than the $164 million—and 42 cents per share—the company did one year prior.  Sales, however, fell from $3.78 billion last year, to $3.71 billion.  Analysts had estimated $3.77 billion.