Gap Gets a Boost From Old Navy, Cost Cutting, and Savings, Sending Shares Soaring

Old Navy and Gap

Bloomberg / Contributor / Getty Images

Key Takeaways

  • Gap shares soared to their highest level in almost two years as the apparel retailer beat quarterly estimates, although it warned about the upcoming holiday season.
  • The company credited the strong results to cost cutting, lower commodity expenses, and fewer promotions.
  • Gap got a boost from its Old Navy stores, which was its only brand to post an increase in same-store sales.

A rebound at Old Navy stores helped Gap (GPS) post better-than-expected results, and shares skyrocketed over 30% in early trading on Friday. However, the company warned about a slow holiday shopping season ahead.

The apparel retailer posted third quarter fiscal 2023 earnings per share (EPS) of $0.59, three times forecasts. Revenue fell 7% from a year ago to $3.77 billion, but that also exceeded estimates. Comparable store sales were down 2%, better than anticipated.

Gap boosted its gross margin by 390 basis points (bps) to 41.3% as the company benefited from cost-cutting measures, lower commodity expenses, and fewer promotions.

Sales at Old Navy were down 1% to $2.13 billion, but comparable store sales advanced 1% on strong demand for clothing for women, children, and babies, as well as an acceleration in the active wear category. Sales declined 15% at its namesake Gap stores, they lost 11% at Banana Republic, and slumped 18% at Athleta. Comparable store sales fell at all three.

CEO Richard Dickson said the results demonstrated Gap’s ability to “drive operating and financial discipline." He added that “this rigor” has put the company on a stronger financial footing.

Gap now anticipates holiday quarter sales to be flat to slightly negative compared to 2022, while analysts had been looking for a rise of 0.3%. It noted that “positive signs at Old Navy and Gap balance the continued work underway at Athleta and Banana Republic.”

Shares of Gap soared to their highest level since January 2022 following the news.

GPS

TradingView

Do you have a news tip for Investopedia reporters? Please email us at
Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. Gap. "Gap Inc. Reports Third Quarter Fiscal 2023 Results."

Take the Next Step to Invest
×
The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.