Gap Actions fell in prolonged exchanges Thursday after the company warned that prices will have an impact on its profits in the future.
When Gap said the results for the last time in May, he said he expected the prices between $ 100 and $ 150 million on a net basis, but on Thursday, he said that these costs are now between $ 150 million and $ 175 million.
Its annual operating room should be between 6.7% and 7%, against 7.4% in the previous year, reflecting a price impact between 1 percentage point and 1.10 percentage points.
In his current quarter, he expects his gross margin to be down between 1.5 and 1.7 percentage points, driven by tariff costs.
Beyond the prices, the specialty clothing company behind Old Navy, Athlean, Banana Republic and its homonymous banner gave mixed results in its second tax quarter. Here is how Gap worked in the quarter compared to what Wall Street provided, on the basis of a survey of LSEG analysts:
- Profit by action: 57 cents against 55 cents expected
- Income: $ 3.73 billion against $ 3.74 billion expected
The declared net profit of the company for the period of three months which ended on August 2 was $ 216 million, or 57 cents per share, against $ 206 million, or 54 cents per share, a year earlier.
Sales reached $ 3.73 billion, up $ 3.72 billion a year earlier. Sales were lower than those planned, as well as comparable sales. During the quarter, comparable sales increased by 1%, lower than the 1.9% increase that analysts expected, Streetaccount.
While Gap, Banana Republic and Old Navy have all seen comparable sales increase during the quarter, the athlete resulted in the overall performance of the company with comps down 9%.
“Obviously, the athlete is a powerful brand in active space, being the number five brand in space, but we are disappointed with the quarter. We have moved away, if you want, really distinct performance roots,” CEO Richard Dickson told CNBC in an interview. “We have paid a lot of attention, trying to court a new customer, and ultimately did not have enough offers for our main client. While we will balance this, we were very transparent to say that it is a year of reset for us.”
Last month, Gap announced that Maggie Gauger, a longtime veteran from Nike, was exploited as the next CEO of athlete – the third senior manager hired to lead the brand in the past two years.
The company has reaffirmed its prospects for net sales growth for the 2025 financial year and continues to expect income to increase between 1%and 2%, in accordance with estimates of 1.6%, according to LSEG. For the current quarter, GAP expects sales to increase between 1.5% and 2.5%, better than the 2% that analysts had estimated, according to LSEG.
To compensate for the impact of prices, GAP does what other companies do: working with its suppliers, adjusting your supply, diversifying your supply chain and taking targeted price increases if necessary.
In particular, the company said that it does not expect the annualization of prices to lead to a new drop in operating profit in 2026.
“Regarding prices, we make targeted adjustments with prices, as we always do. There is nothing that we have done that is significantly different,” said Dickson. “We focus on ensuring that we present to our consumer the right value proposal, and we finally want to make even safer than we support the momentum and the market share that our manual has played.”
Just over two years after Dickson’s mandate as CEO of GAP, the company is in a very different position. Six consecutive quarters of comparable sales growth is observed, he seated on a treasury battery of 2.2 billion dollars and his marks are back at the center of culture and conversation.
Recently, Gap launched his “Better in Denim” campaign with Katseye and Kelis in 2003 “Milkshake”. Dickson said the campaign had been a success outside competition, offering 20 million views in the first three days, 400 million total views and 8 billion impressions. It is also research n ° 1 on Tiktok, said Dickson.
“We could all recognize that Gap went from what was a clothing retailer barely a few years ago, who was too promotional and who did not necessarily have a strong voice from the point of view of merchandise to consumers, and today, it is a brand of pop culture that tells of great stories, leading to major merchandising initiatives and has undoubtedly shaped culture with some of the programs and marketing products” Dickson. “This proves that Gap is a powerful brand of pop culture, and that’s also what our game book looks like when you get things right.”
The campaign highlights the effort that the gap has taken to remain competitive in the crucial category of Denim, in particular with Levi’s recent partnership with Beyoncé and American eagleCampaign with Sydney Sweeney. At a time when consumers retreat to pleasant products in Have like new clothes and accessories, retailers had to do more to cut the noise and make sure they resonate with consumers.
However, while the company continues to make progress in its recovery plan, Wall Street expected a lot of things and Gap had to work harder to beat expectations.
During the quarter, its gross margin arrived at 41.2%, behind expectations of 41.9%, according to Streetaccount.
Here is an overview of how each brand has worked:
Old Navy: Gap’s most important and most important brand experienced sales of $ 2.2 billion, up 1% compared to last year. Comparable sales increased by 2%, compared to expectations of 2.2%, according to Streetaccount.
Gap: The homonymous banner experienced net sales of $ 772 million, up 1% compared to last year. Comparable sales increased by 4%, compared to 4.1%, according to Streetaccount. It is the seventh consecutive quarter of the growth of comparable sales.
Republic of banana: The Safari-Chic brand, Business Essentials, experienced net sales of $ 475 million, down 1% compared to last year. Comparable sales increased by 4%, well in advance on expectations of 0.2%, according to Streetaccount.
Athlete: The Athleisure brand experienced sales of $ 300 million, down 11% compared to last year. Comparable sales fell 9%. The brand’s new CEO is trying to reverse this crisis and reconnect with the main athlete consumer.