Markets

Gap Falls on Dismal October and Q3 Sales, Tweaks Forecast

A generic image of a stock chart on a display
Credit: Shutterstock photo

Shares of Gap Inc.GPS declined further 5.7% in after-hours trading session after closing down 2.8% at $27.69 in yesterday's regular trading session. The fall was due to the company's dismal sales results for October and the third quarter of fiscal 2015.

The apparel retailing giant's downfall in October and the third quarter is due to double-digit decline in comparable-store sales (comps) at its Banana Republic brand and dismal Gap Global performance, coupled with negative foreign currency impact. However, the company's Old Navy brand sustained its comps growth trend.

Coming to the sales results, Gap's comps for October decelerated 3%, same as the prior-year period. Net sales totaled $1.20 billion for the four weeks ended Nov 1, 2015, down 4.8% year over year.

Brand-wise, October comps for Gap Global were down 4% compared with a 7% decline recorded in the year-ago period, while comps for Banana Republic Global dipped 15% as against a 2% fall last year. On the other hand, comps for Old Navy Global rose 2%, whereas it was flat in the prior-year period.

For third-quarter fiscal 2015, Gap reported a comps decline of 2% same as the prior-year quarter. Moreover, net sales totaled $3.86 billion, down 3% from the prior-year period. Sales results for the quarter included nearly $98 million impact from foreign currency translations, mainly owing to weaker Japanese yen and Canadian dollar against the U.S. dollar. On a currency neutral basis, sales for the quarter remained flat with last year.

The company's third-quarter sales results reflected growth for another consecutive quarter at Old Navy. Additionally, the company continues to carry out the strategic plans slated for the revival of its Gap brand.

Brand-wise, comps for the third quarter at Gap Global fell 4% compared with a 5% decline in the year-ago period, while comps for Banana Republic Global decreased 12% as against flat comps last year. On the other hand, comps for Old Navy Global rose 4% compared with a 1% increase in the prior-year quarter.

The company has been portraying dismal sales trends for a while now mainly hurt by the intensifying currency headwinds. Further, disappointing performance of its core Gap and Banana Republic Global brands are pressing concerns for the company. Persistence of these headwinds is likely to dent the top line and weigh on Gap's overall performance.

Following another dismal October and third-quarter performance, the company expects earnings per share for the third quarter of fiscal 2015 to be in the range of 62-63 cents. This excludes about 2.5 cents negative impact from foreign currency movements.

Moreover, the company now expects its inventory dollars per store at the end of third quarter to fall marginally short of its previously provided guidance.

Apart from Gap, certain other retailers also posted their comps data for October. While Rite Aid Corp. RAD and L Brands Inc. LB witnessed comps growth of 1% and 5%, respectively, comps at Zumiez Inc. ZUMZ declined 8.1%.

Gap, which carries a Zacks Rank #3 (Hold), is scheduled to release its third-quarter results on Nov 19 and November comps on Dec 3.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days . Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

RITE AID CORP (RAD): Free Stock Analysis Report

ZUMIEZ INC (ZUMZ): Free Stock Analysis Report

GAP INC (GPS): Free Stock Analysis Report

L BRANDS INC (LB): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

ZUMZ RAD GPS

Other Topics

Stocks

Latest Markets Videos

Zacks

Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

Learn More