Gap Inc’s sales growth picks up pace amid ongoing reinvention

(Source: Gap Inc)

Gap Inc has reported another quarter of positive sales growth which an analyst said reflects the early impact of the business’s recovery program.

The company’s net sales for the first quarter ended May 4 were up 3 per cent year-on-year to $3.4 billion, with comparable sales also up 3 per cent.

GlobalData MD Neil Saunders said the growth is pleasing despite coming off the back of weak prior-year numbers. The pace of growth has increased since last quarter, which shows that the changes being made in the business are starting to have an impact, he added.

However, the progress is still partial and modest, and the ongoing reinvention will need more time to make a tangible difference to the company, Saunders continued.

At Old Navy, sales increased 6.1 per cent in the US, while comparable sales rose 3 per cent. The analyst said the brand had “turned a corner” after over a year of underperformance, given sales were also solid last quarter.

For the Gap brand, sales increased by 3.4 per cent in the US and increased by 3 per cent on a comparable basis, driven by good marketing and interesting new assortments. However, a deeper change is still needed to rebuild the credibility and standing of Gap in the apparel market, Saunders stated.

Sales at Banana Republic were up by 2.4 per cent in the US but still down on a two-year stack. “Finding a new position for the brand is tricky and we don’t think management has yet determined in which direction it wants to steer the brand,” the analyst commented.

On the bottom line, the company posted an operating income of $205 million and a net income of $158 million.

Overall, Saunders said the quarter was another win for CEO Richard Dickson and his team. “The early signs are encouraging, and we particularly welcome the change in leadership style and thinking that Dickson has brought into the business,” the analyst concluded.

The company has raised its full-year outlook, with net sales expected to be up slightly and operating income to record a mid-40 per cent growth range. 

You have 7 articles remaining. Unlock 15 free articles a month, it’s free.