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Gap lowers outlook as Q1 sales drop 13%

Jeremy Lim
27 May 2022

Gap Inc., the parent company of Old Navy, Gap, Banana Republic and Athleta, has reported its financial results for the first quarter of fiscal year ending 30 April 2022.

The company posted net sales of £2.7 billion ($3.5 billion), down 13% compared to last year due to divestitures, store closures, and the transition of the company’s European business to a partnership model with Next.

Comparable sales were down 14% year-over-year, and online sales declined 17% compared to last year and represented 39% of total net sales. Store sales declined 10% compared to last year.

The company posted a net loss of net loss of £128 million ($162 million) while operating loss was £156 million ($197 million) in the quarter.

By brand, Gap's net sales of £626 million (791 million) were down 11%.

Old Navy net sales of £1.4 billion ($1.8 billion) were down 19% compared to last year, negatively impacted by size and assortment imbalances, ongoing inventory delays, and product acceptance issues in some key categories.

Banana Republic net sales of £381 million ($482 million) were up 24%, whilst Athleta net sales of £285 million ($360 million) were up 4% compared to last year.

The company ended the quarter with 3,414 store locations in over 40 countries, of which 2,825 were company operated.

The company now expects fiscal 2022 revenue to decline in the low to mid-single digit range versus last year. Gross margin is expected to be in the range of 36.5% to 37.5%.

Commenting on the results, Sonia Syngal, CEO, Gap Inc said: "Our Q1 results and updated fiscal 2022 outlook primarily reflect industry-wide headwinds as well as challenges at Old Navy that are impacting our near-term performance. While we are disappointed to deliver results below expectations, we are confident in our ability to navigate the headwinds and re-stabilize the Old Navy business in order to deliver continued progress on our long-term strategy.

"We believe that we can navigate this period of acute disruption and build an even more resilient and agile company. We remain anchored by our belief in our iconic purpose-led brands – Old Navy, Gap, Banana Republic, and Athleta – and are focused on making continued progress against our Power Plan strategy and getting back on track toward delivering growth, margin expansion, and value for our shareholders over the long term."

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