Q2 2023 Earnings Report for Gap (GPS)

Gap recorded a mix of results on Thursday, with underwhelming guidance for the current quarter, as the long-standing mall retailer experienced another decline in sales across all four of its flagship brands.

Although the company surpassed analysts’ expectations for earnings per share, it fell short on the revenue front.

Here’s a breakdown of how the apparel retailer performed in its fiscal second quarter compared to Wall Street’s projections, based on a survey of analysts by Refinitiv:

• Earnings per share: 34 cents, adjusted, versus the expected 9 cents
• Revenue: $3.55 billion, compared to the expected $3.57 billion

Gap reported a net income of $117 million, or 32 cents per share, for the three-month period ending July 29. This is an improvement from a loss of $49 million, or 13 cents per share, in the same period last year. When excluding one-time items, Gap’s net income stood at 34 cents per share.

Sales also experienced an 8% dip, falling to $3.55 billion from $3.86 billion in the previous year.

Leading the company as its CEO is Richard Dickson, formerly an executive at Mattel. His appointment brings a wealth of experience in branding, having overseen Mattel’s successful Barbie franchise. Gap is counting on him to inject new life into its four brands: Gap, Old Navy, Banana Republic, and Athleta.

All four brands, which cater to distinct customer bases with different assortments, have been grappling with declining sales for several quarters. Dickson’s task is to reverse this trend.

Prior to Dickson’s arrival, Gap’s chairman, Bob Martin, acted as the interim CEO for over a year. During this time, Martin focused on restructuring the business and streamlining the management organization to ensure a smooth transition for the new CEO.

Over the past year, Gap has made significant workforce reductions, cutting around 2,000 employees. This move was aimed at eliminating layers of bureaucracy and improving decision-making agility, ultimately enhancing the company’s creative efforts.

Gap stated that these layoffs would yield savings of approximately $300 million, with the first half of this amount expected to be realized in fiscal 2023. Despite the decline in sales, Gap’s margins in the last quarter (April 29) rose by 5.6 percentage points year over year to 37.1%, causing its stock to surge in aftermarket trading.

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