Specialty apparel company Gap Inc logged a 7 per cent year-on-year decrease in net sales to $3.8 billion for the third quarter, including a 2 percentage point impact from the sale of Gap China.

Comparable sales and store sales were down 2 per cent and 6 per cent, respectively. Online sales also dropped 8 per cent compared to last year.

GlobalData MD Neil Saunders said the company is starting to “move in the right direction”, although the numbers are far from positive.

“Despite being up against a much tougher prior year comparative, the overall decline and the dips at some of the brands are far more modest than those posted over the past few quarters.”

Old Navy’s sales were down slightly by 1 per cent, which Saunders said is a marked improvement on the prior quarter. 

Net sales of the Gap brand were down 15 per cent. Excluding the negative impact from the sale of Gap China and the shutdown of Yeezy Gap, net sales were down about 6 per cent. This is modestly better than last quarter but still represents a significant underperformance, according to Saunders.

Banana Republic and Athleta also recorded sales declines of 11 per cent and 18 per cent, respectively.

On the bottom line, the company’s net income fell by a sharp 22.7 per cent, but mostly due to this year’s income tax expenses. At the operating level, profit grew 34.4 per cent, supported by a better margin from reduced promotions and lower commodity costs.

“The results are a small initial vote of confidence in the new CEO, Richard Dickson and some of the early steps he has taken to stabilize the business,” Saunders commented.

For the full year, the company said net sales could be down in the mid-single digit range. It expects to open 15 to 20 Old Navy and Athleta stores and close about 50 Gap and Banana Republic locations this year.