Gap Inc has reported growth in comparable sales for the second quarter, driven by better results at its three core brands.
The company’s net sales for the quarter ended August 2 were flat at $3.7 billion, but comparable sales rose 1 per cent thanks to growth at the Gap, Banana Republic and Old Navy brands.
According to GlobalData MD Neil Saunders, this quarter was another acid test for the retailer as it started to lap tougher comparatives from the prior year during a period when the apparel market was a little more discount driven and value focused.
“While the company may not have vaulted over the hurdle, it still cleared it nicely with a lift in comparable sales and a modest expansion of total revenue – which was dragged down by some planned store closures,” he continued.
All of this can be taken as a win, the analyst said, adding that this is now the company’s sixth consecutive quarter of positive comparables.
“Most pleasing is the fact that comparable sales were positive across all three main brands,” he stressed.
At a divisional level, Gap and Banana Republic led the growth, each producing a 4 per cent uplift in comparable sales, followed by Old Navy with a 2 per cent increase. Athleta was the only brand to slip with a 9 per cent decline in comparable sales.
Saunders attributed the positive numbers and the company’s established recovery to the efforts made by CEO Richard Dickson. “Dickson and his management team have injected significantly more energy into the business as a whole and have given those that work their permission to think more boldly and ambitiously about the company and its future.”
The analyst pointed out the improvement in terms of marketing, which helped improve the visibility of the brands and are drawing more younger shoppers into their orbit.
There has also been a step up on the shop floor, with more irrelevant products, a better style profile, and a much cleaner and easier shopping experience, he said.
On the bottom line, Gap’s net income rose from $206 million in the prior year to $216 million. Saunders said some of the financial progress Gap made during the quarter was dragged down by tariffs.
For the full year, the retailer expects net sales to increase by 1 per cent to 2 per cent.
