Getty Images Gap Inc. withdrew its financial outlook for the year on Thursday after it posted a net loss in its fiscal second quarter and its Old Navy chain continued to struggle with the wrong mix of sizes and styles. The San Francisco-based company, which is in the midst of finding a new CEO, cited recent execution challenges and uncertain macroeconomic trends for withdrawing its guidance for 2022. Decades of high inflation is hitting lower-income consumers which are among the key customers for some of the company’s brands. “Going forward, we are taking steps to sequentially reduce inventory, balance our assortments to better meet changing consumer needs, aggressively manage and reevaluate our investments, and strengthen our balance sheet,” said Chief Financial Officer Katrina O ‘Connell in a news story. release. For the three-month period ended July 30, the retailer reported a net loss of $49 million, or 13 cents per share. A year earlier, it reported net income of $258 million, or 67 cents per share. Excluding one-time items, the company earned 8 cents per share. Gap’s revenue for the period fell 8% to $3.86 billion from $4.2 billion a year earlier. That beat estimates of $3.82 billion, according to Refinitiv research. Gap shares rose 7% in extended trading. Online sales were down 6%, accounting for 34% of total sales. Comparable sales, which track revenue online and at stores open for at least 12 months, fell 10 percent from a year ago. That included a 15 percent drop at Old Navy, which the company said was hurt by inventory backlogs, “product acceptance issues” in key categories and slowing demand among lower-income shoppers. At the company’s eponymous Gap banner, global comparable sales fell 7%, in part due to ongoing and planned store closings. Comparable sales at Athleta fell 8%, with the company noting a shift in consumer preference from sports to work-based categories. At Banana Republic, comparable sales rose 8% as the retailer looked at its investments in quality and changing consumer trends. Gap said in prepared remarks that it began to see an improvement in sales trends in July and August, coinciding with falling gas prices. However, the company is not offering a forecast for the full financial year due to continued uncertainty about consumer behavior and offers at other retailers. The company ended the last quarter with $3.1 billion in inventory, up 37% from a year earlier. Some of it was purposefully packed to sell in another season, and some of it is still in transit, Gap said. As part of its cost-cutting efforts, the company said it reduced the number of new Old Navy stores it planned to open in the last half of the year. “While our increased inventory and squeezed margins are current realities in light of volatile market conditions, they do not determine our ability to capitalize on Gap Inc.’s strengths. to win,” said Gap interim CEO Bob Martin, who is also executive chairman.
