Gap’s earnings, sales beat, retailer names new CFO

Gap Inc. on Thursday reported fourth-quarter earnings and sales that topped analysts’ estimates, as it announced a slew of new leadership changes.

Its shares initially jumped more than 5% in after-hours trading on the news. The stock was recently up about 1%.

“We began to see stabilization in our business in the fourth quarter, driven primarily by improvement in Old Navy’s performance,” interim CEO Bob Fisher said in a statement.

The company also said “it is not currently possible” to quantify the impact that the coronavirus will have on its business in 2020. But it did say it expects to at the very least take a sales hit of roughly $100 million, which would lower earnings by 10 cents per share, during the first quarter in Asia and Europe. Gap also said it will suspend share repurchases in 2020 because of the coronavirus.

Here’s how the company did during the holiday quarter ended Feb. 1 compared with what analysts were expecting, based on a poll by Refinitiv:

• Earnings per share: 58 cents, adjusted, vs. 41 cents expected
• Revenue: $4.67 billion vs. $4.55 billion expected
• Same-store sales: down 1% vs. a drop of 3.8% expected

Gap reported a quarterly net loss of $184 million, or a loss of 49 cents per share, compared with net income of $276 million, or 72 cents a share, a year ago.

It recorded an impairment charge of $296 million during the quarter tied to the store assets and operating lease assets of its flagship stores. Specifically, Gap said it started to consider shuttering or subleasing some of its flagships, including in Times Square, “given their declining importance as marketing and brand awareness tools.”

Excluding the charges, Gap earned 58 cents per share during the quarter, better than the 41 cents analysts were calling for, based on Refinitiv data.

Net sales during the quarter climbed about 1% to $4.67 billion from $4.62 billion a year ago. That was better than the $4.55 billion analysts were expecting.

Sales online and at all Gap Inc. stores open for at least 12 months dropped 1%, which was not as bad as the 3.8% drop that analysts were anticipating.

It said same-store sales at Old Navy during the fourth quarter were flat, while sales at Gap dropped 5%, sales at Banana Republic were flat and sales at Athleta, its athletic apparel business for women, were up 2%.

Gap earlier this month said it was tapping its Old Navy chief, Sonia Syngal, to be CEO, effective March 23.

Earlier this year, Gap called off plans to split Old Navy into a separate public company. That decision followed the ouster of former Gap Inc. CEO Art Peck in late 2019.

On Thursday, the company said current Old Navy CFO Katrina O’Connell will become CFO of Gap Inc., succeeding Teri List-Stoll. It also named former Athleta Chief Nancy Green as the new leader of Old Navy. And it said its specialty brands, along with Gap’s Asia business, will be led by Mark Breitbard, current president and CEO of Banana Republic.

Looking to 2020, the coronavirus outbreak has thrown a wrench in many retailers’ businesses, including Gap.

“Due to the evolving coronavirus situation, we are facing a period of uncertainty regarding the potential impact on both our supply chain and customer demand,” Syngal said in a statement.

Not including a hit from the coronavirus, Gap is calling for 2020 same-store sales and net sales in fiscal 2020 to be down low-single digits.

Gap shares have tanked more than 60% over the past 12 months. The company has a market cap of about $3.8 billion.

Find the full earnings press release here.