Tuesday, November 22, 2016


Add Gap to the long list of struggling retailers. According to this Retail Dive report Gap has recorded seven straight quarters of declining sales and warns of a grim holiday season.
Gap’s third-quarter numbers are “the latest in a long line of terrible results which, tellingly, have resulted in the Gap division’s U.S. revenue declining by 21% over the past three years,” Conlumino retail analyst Neil Saunders said in a note emailed to Retail Dive.
“In a set of results as predictable and boring as its ranges, Gap Inc. has once again posted a set of very dismal numbers,” said Saunders, Conlumino’s CEO. “Rather worryingly the total sales decline has accelerated since last quarter, with a particularly sharp deterioration at Gap in the U.S. which saw sales plunge by almost 10%.”
Furthermore, Gap lacks the profitability it needs to climb out of its predicament. “These are serious declines which puts Gap on a trajectory where it will eventually run out of financial headroom to engineer changes and reinvent its business,” Saunders said.
Saunders said Gap is simply unable to come up with the goods that people want to buy. “This is a company in a tailspin, with no real clue how to pull out of it,” he said. “Art Peck proudly proclaims that as the company moves into holiday season, ‘teams are sharply focused on execution and delivering great experiences across the portfolio.’ If a bland selection of lumpy sweaters thrown on a rail is his definition of a great experience, then Gap is certainly delivering. It may sound facetious, but this is the reality that greets shoppers; and it is a reality that makes one wonder whether management ever ventures forth into its own stores.”
Gap executives warned that the holiday season looks grim. “Traffic remains challenging and as a planning assumption, we believe that will carry forward as well,” CFO Sabrina Simmons said Thursday, according to Seeking Alpha’s transcript of Gap’s Q3 conference call. “We feel that it’s appropriate to plan for that obviously we’re doing work to try to beat that trend, but we understand the fact that traffic is likely to continue to be challenging as we look forward.”
  • The apparel retailer’s Q3 same-store sales decreased 3% overall, in line with analyst estimates and on par with the same quarter last year, with the negative impact from its Fishkill distribution center firecontributing some 2 percentage points to the decline. Same-store sales at both the Gap brand and Banana Republic fell 8%, but rose 3% at Old Navy.
  • Gap’s Q3 net income fell to $204 million, or 51 cents per share, from $248 million, or 61 cents per share, in the same period last year. Gap reaffirmed its fiscal year adjusted diluted earnings to be in the range of $1.87 to $1.92 per share, missing the average estimate for $2.02 per share, according to Thomson Reuters I/B/E/S.

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