Gap Inc. shares fell in the extended session Thursday after the clothing retailer turned in a wider-than-expected loss and issued a disappointing outlook as the company’s Old Navy brand weighed down results.
shares dropped 13% after hours, following a 4.4% rise in the regular session to close at $11.12. At Thursday’s close, shares have fallen 67% over the past 12 months, compared with a 29% drop by the SPDR S&P Retail ETF
and a 3.3% decline by the S&P 500 index
“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,” said Sonia Syngal, Gap’s chief executive, in a statement. “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.”
In late April, the company had warned of larger-than-expected sales declines as well as the departure of Old Navy Chief Executive Nancy Green, who had held the position for about two years.
Gap reported a first-quarter loss of $162 million, or 44 cents a share, versus net income of $166 million, or 43 cents a share, in the year-ago period. The company did not supply adjusted bottom-line results, which exclude stock-based compensation expenses and other items, for the quarter, but reported adjusted earnings of 48 cents a share in the year-ago period.
Revenue declined to $3.47 billion from $3.99 billion in the year-ago quarter, as Old Navy sales proved to be the biggest disappointment, down 19% to $1.8 billion from a year ago.
Analysts surveyed by FactSet had forecast a loss of 15 cents a share on revenue of $3.44 billion.
“We are revising our fiscal 2022 outlook to reflect the impact of certain factors impacting our near-term performance, including execution challenges at Old Navy, an uncertain macro consumer environment, inflationary cost headwinds and a slowdown in China that is impacting Gap Brand,” said Katrina O’Connell, Gap’s chief financial officer, in a statement. “We expect our performance to improve modestly in the back half of the year and accelerate as we enter fiscal 2023.”
Gap forecast adjusted earnings of 40 cents to 70 cents a share for the year on a “low- to mid-single-digit range” decline from the previous year.
Analysts had estimated full-year earnings of $1.22 a share on revenue of $16.22 billion, or a 2.7% year-over-year decline.