Gap's stock jumps 23% as the retailer swings to profit and raises guidance
By Claudia ASSIS
Gap also trims its inventory in first quarter
Gap Inc. shares rallied more than 20% in the extended session Thursday after the retailer reported first-quarter earnings and sales well above investors' expectations, raised its guidance for the year and pared down its inventory.
"Our financial footing remains strong and positions our company well for the future," Chief Executive Richard Dickson said on a call with analysts after the results. Consumers are connecting with the company's turnaround, he said.
Chief Financial Officer Katrina O'Connell said on the call that Gap demonstrated its "strong" results through "better sales trends, gross margin expansion, expense discipline, lean inventory and a strong balance sheet."
Being consistent takes time, she said.
Gap (GPS) reported fiscal first-quarter earnings of $158 million, or 41 cents a share, contrasting with a loss of $18 million, or 5 cents a share, in the year-ago quarter.
See also: Nordstrom shares fall after wider-than-expected first-quarter loss
Sales rose 3% to $3.4 billion, including a 5% revenue increase for its more affordable Old Navy brand. Same-store sales were up 3%, the company said.
Analysts polled by FactSet expected Gap to report earnings of 15 cents a share on sales of $3.29 billion. Same-store sales were seen up 1.1% in the quarter.
The retailer also said it ended the quarter with inventory at $1.95 billion, down 15% compared with last year.
Gap said it was raising guidance for fiscal 2024 on the strength of its first quarter's higher net sales and "meaningfully higher" operating income growth compared with its previous expectations.
It guided for net sales up slightly in the fiscal year, compared with a previous estimate of flat sales. It also guided for fiscal second-quarter growth in the low single digits.
"This outlook takes into consideration the continued uncertain consumer and macro environment," the company said.
Related: Costco beats profit and sales forecasts, but stock pulls back from record highs
Gap's Dickson came on board in July after many years with Mattel Inc. (MAT)
In February, the company appointed fashion designer Zac Posen as its new creative director, and earlier this month actresses Anne Hathaway and Da'Vine Joy Randolph wore Gap dresses at red-carpet events; Hathaway's shirtdress went for sale at Gap this week but quickly sold out.
Gap shares jumped 23.5% after hours, and have gained about 8% so far this year, compared with an advance of around 10% for the S&P 500 index SPX.
-Claudia ASSIS
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05-30-24 2024ET
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