Gap Japan Co., Ltd. On Thursday, it drastically lowered its full-year profit forecast as it reported a decline in sales in the first quarter, which was dragged into the former Navy business.
An imbalanced combination of clothing sizes, ongoing inventory delays, and rising price cut promotions reduced Old Navy’s performance this quarter.
Low-income consumers, Old Navy’s target customers, are beginning to suffer from inflation, CEO Sonia Singal told CNBC. Shoppers also made a rapid shift from buying active clothing and fleece hoodies (Old Navy’s “sweet spot”) to looking for party dresses and office clothing, she said in her telephone interview. rice field.
“Whether it was last year’s Covid or this year’s post-Covid behavior, we’re dealing with a very volatile consumer signal,” Syngal said. “Over time, we will be able to balance customer preferences for product types.”
Gap share fell almost 20% on extended trading.
The consequences of the gap are greater than shaped in the retail industry between companies that cater to Americans who have a lot of cash in their wallets and companies that sell to cost-conscious shoppers looking for a deal. Shows the difference.
As inflation heats up, the latter has been hit hardest and has already begun to cut certain purchases. Meanwhile, the wealthiest consumers continue to get expensive costumes, jewelry and luggage for their summer vacation at stores such as: Nordstrom, Bloomingdale’s When Ralph Lauren..
In late April, the gap Warning about obstacles in Old Navy business When announcing the resignation of Nancy Green, CEO of the unit. Syngal is looking for a successor to Green and is helping to tentatively lead the discount apparel brand.
The 2022 fiscal year gap expects adjusted revenue per share to be between 30 and 60 cents. This is down from the previous $ 1.85 and $ 2.05 range. It’s also well below analysts’ expectations of $ 1.34 per share, based on Refinitiv data.
Chief Financial Officer Katrina O’Connell said Gap revised its outlook to explain Old Navy’s “business challenges” as uncertain macroeconomic conditions and inflationary cost pressures. In addition, China’s slowdown is hurting Gap’s brand of the same name.
Gap had a net loss of $ 162 million, or 44 cents per share, in the three months to April 30. In contrast, the previous year’s $ 166 million, or revenue per share, was 43 cents.
Revenue was $ 3.48 billion, down about 13% from $ 3.99 billion in the previous year. This was slightly above the $ 3.46 billion forecast.
According to Gap, sales are due to an estimated 5 percent points plus a shift to a partnership model for sales, store closures, and European operations, as retailers rose a year ago from the stimulus check. I was hit by about 3 percentage points.
Overall, same-store sales were down 14% year-over-year, outpacing the 12.2% decline analysts were looking for. In that number, Gap said online sales were down 17% compared to last year and over-the-counter sales were down 10%.
The breakdown of existing store sales by brand is as follows.
- Gap: 11% year-on-year decrease
- Old Navy: 22% year-on-year decrease
- Banana Republic: 27% year-on-year increase
- Athleta: 7% down
Gap executives also admitted on Thursday: Recent pushes to sell more plus size items In Old Navy, retailers didn’t have enough core sizes for their customers, and there were too many expansion sizes that weren’t purchased.
“Our wisdom was probably the launch of Comprehensive Sizing, which was far from the actual messaging, which is the core value messaging that works in Old Navy,” CFO O’Connell told CNBC on the phone. .. “We are really trying to get back to it.”
As of April 30, Gap’s total inventory increased by 34% compared to the previous year.
These levels begin to decline throughout the year, but may continue to rise in the second quarter, O’Connell said.
“Our inventory levels were significantly higher than we expected,” O’Connell said, and almost half of the unwanted increase is the long transit time she expects she won’t get better soon. He added that it was due to.
Also on Thursday American eagle After missing an analyst’s quarterly forecast, we reduced our annual operating margin forecast. Its share has fallen by about 12%.