GAP pulls 2022 financial outlook amid net loss in Q2

Gap Inc. has posted its financial results for the second quarter of fiscal year ending 30 July 2022, revealing a net loss of £41.5 million ($49 million).

The parent company of Old Navy, Gap, Banana Republic and Athleta reported net sales of £3.2 billion ($3.86 billion), down 8% compared to last year.

Comparable sales were down 10% year-over-year. Online sales declined 6% compared to last year and represented 34% of total net sales while store sales declined 10% compared to last year.

The Gap brand posted net sales of £747 million ($881 million), down 10% compared to last year. The company said the decrease in net sales was driven by strategic store closures as well as category mix imbalances during the quarter.

In addition, the Gap outlet business is experiencing near-term softness stemming from inflationary pressures impacting the lower-income consumer. Global comparable sales were down 7%. North America comparable sales were down 10%.

The company ended the quarter with 3,390 store locations in over 40 countries, of which 2,799 were company operated.

Gap added it is withdrawing its prior fiscal 2022 outlook and will provide related commentary for the remainder of fiscal 2022, citing the the actions the company has underway and in the midst of a CEO transition, combined with the uncertain macro-environment.

Katrina O’Connell, Executive Vice President and Chief Financial Officer, Gap Inc said: "We have four strong brands and leverage in the portfolio to deliver over the long-term, however our recent execution challenges combined with the uncertain macro trends requires us to manage the levers in our control and take the actions necessary to drive improvement across our entire business.

"In the near-term, we are taking actions to sequentially reduce inventory, rebalance our assortments to better meet changing consumer needs, aggressively manage and reevaluate investments, and fortifying our balance sheet. While we have work to do, we believe these are the right initial steps to position Gap Inc. back on its path toward growth, margin expansion, and delivering value for our shareholders over the long term."

Bob Martin, Executive Chairman and Interim CEO, Gap Inc added: "This is a pivotal moment in time. While we search for a new leader, I am taking on the role as Interim President & CEO of Gap Inc. with a deep commitment to the company’s success and impatience for change. Having navigated the global retail industry across brands and markets, I am not approaching this work from the sidelines.

"We are taking actions to better optimise profitability and cash flow in the near term, reducing operating costs as well as impairing unproductive inventory. While our elevated inventory and pressured margins are current realities against unsettled market conditions, they do not define our ability to capitalise on Gap Inc.’s strengths to win."