Gap Inc has reported sales growth for the third quarter, which marks another “gentle improvement” at the business and its brands, according to an analyst.
The company’s net sales for the quarter ended November 2 rose 2 per cent to $3.8 billion, with comparable sales up 1 per cent. Store sales decreased 2 per cent, while online sales grew 7 per cent.
“While the growth numbers are far from spectacular and have slowed since the last quarter, they are nevertheless pleasing – especially as they are being delivered against the backdrop of a relatively soft apparel market,” said Neil Saunders, MD of GlobalData.
The improvements also show that the company is on the right track, but much more work is needed to improve ranges and the proposition on the ground, Saunders continued.
At the Gap brand, sales increased 1 per cent and comparable sales were up 3 per cent. According to the analyst, while the general assortment is reasonable, the brand needs to make its products stand out more and justify the higher price points.
Old Navy saw a 1 per cent sales growth and flat comparables, which Saunders said was disappointing but was mainly due to external factors including the weather and sluggish consumer economy. “The hope is that Old Navy will pick up the pace over the holidays as interest picks up for winterwear and strong festive collections, like family PJs, pique the attention of consumers,” he added.
Banana Republic managed to return to growth with a 2 per cent sales uplift. However, Saunders believes the brand is “still trying to find its feet in a market that has moved against smarter casual styles”.
On the bottom line, net income rose 25.7 per cent to $274 million, which the analyst attributed to improved inventory management.
“This is pleasing as it shows that Gap is reinventing its brands at the same time as keeping a firm operational grip on the business – two things that do not always go hand in hand,” he added.
The company has raised its full-year outlook following the solid third quarter, with sales expected to be up 1.5-2 per cent.
“We remain pleased with the direction Gap is taking and the positive energy in the company. There is much more to do in 2025, but Gap has made a good start,” Saunders concluded.
