Gap Inc., the largest specialty apparel company in the U.S. and a house of iconic brands including Old Navy, Gap, Banana Republic, and Athleta, today reported financial results for its Q3, Gap raised its annual sales forecast on Thursday and said the holiday season was off to a “strong start”, with demand increasing,
The annual sales forecast sent the Old Navy parent Gap’s stock up 15% in extended trade. Gap’s sales grew for a fourth consecutive quarter. Gap also topped profit expectations as it rounds off a year of turnaround under CEO Richard Dickson.
Gap’s Gap holiday demand rose sales
With shoppers budgeting to purchase trendy styles, Gap’s strategy of paring back discounts and stocking fresher, popular items that hark back to its roots as a “pop culture brand” has helped the company appeal to a broader customer base.
“I’m proud that Gap Inc. delivered another successful quarter, growing net sales for the 4th consecutive quarter and gaining market share across all brands while meaningfully expanding operating margin,” said President and Chief Executive Officer, Richard Dickson. “Consistent execution of our strategic priorities, including the rigor and repetition we’re applying to our brand reinvigoration playbook, is making us a stronger company and demonstrates our continued progress in unlocking Gap Inc.’s full potential.”
Gap’s Q3 financial results
Gap’s net sales was $3.8 billion up 2% compared to last year. Comparable sales were up 1% year-over-year. Store sales for Gap decreased 2% compared to last year. The company ended the quarter with 3,603 store locations in about 40 countries, of which 2,544 were company operated.
The online sales for Gap increased 7% compared to last year and represented 40% of total net sales. Also, the gross margin saw a 42.7% increase versus last year’s.
Year-to-date net cash from operating activities was $870 million. Year-to-date free cash flow, defined as net cash from operating activities less purchases of property and equipment, was $540 million. The final inventory of $2.33 billion was down 2% compared to last year. Capital expenditures were $330 million. Gap now expects full-year net sales to rise between 1.5% and 2%, compared with its earlier target of marginal growth.
Dividend by Gap
Gap paid a dividend for Q3 of $0.15 per share, totaling $57 million. The company’s Board of Directors approved a Q4 fiscal 2024 dividend of $0.15 per share.
Gap’s profit
Gap’s Old Navy has seen increased sales with fresher styles in denim and dresses, with similar gains reflecting in Athleta, its athletic wear unit. Gap and athletic apparel maker Under Armour have defied broader weakness in spending on apparel and accessories this year as customers hold out either for steep discounts or save up to buy trending and popular items.
“Right now we are focused on winning early,” said Katrina O’Connell Gap’s financial chief on a post-earnings call, commenting on the company’s plans for the shortened holiday shopping period.
“We have a much more pronounced holiday expression in our stores and are driving relevant interest and early customer engagement.”
Gap’s forecast
Gap also raised its annual gross margin expansion target for the year by 20 basis points as the company maintained leaner inventory levels, and signed long-term freight contracts to drive costs lower.
Gap’s stock update
Gap share price was up 6.89% to $22.04 at closing and added to these gains in the after-hours trading. The Gap stock last traded up 15.70% in the after-hours session. The stock has underperformed the broader market this year, rising 8.3% versus the 25% gain for the broader S&P 500 Index. The SPDR S&P Retail ETF has been up 10.1% for the same period.
