NEW YORK — Gap Inc. delivered a largely anticipated weak third-quarter earnings report Thursday due to soft traffic levels at all three brands and disappointing customer response to fall merchandise.
The company said because November traffic levels have deteriorated more than expected, it sharply lowered full-year earnings expectations to below Wall Street estimates.
In the three months ended Oct. 29, the San Francisco-based company earned $212 million, or 24 cents a diluted share, compared with $265 million, or 28 cents, a year ago. Analysts had expected a profit of 24 cents.
Revenues fell 3 percent to $3.86 billion, and consolidated same-store sales were down 7 percent. By division, sales at Gap North America were flat at $1.4 billion, while Banana Republic saw sales decline slightly to $537 million from $538 million. Old Navy had a 5.9 percent decline in sales to $1.6 billion, and internationally, sales were down 4.7 percent at $324 million.
Year-to-date, the specialty retailer had earnings of $775 million, or 86 cents, up from $772 million, or 81 cents, a year ago. Revenues fell slightly to $11.2 billion from $11.37 billion.
Gap maintained that its merchandising issues are "fixable" and that it is taking "aggressive" actions to resonate again with customers. Gap said on a post-earnings conference call that it will focus on the three fundamentals of retailing: product, including providing key merchandise items to deliver its "fresh, casual, American-style" aesthetic; store experience, including visual displays, customer service and remodels, and marketing, including its holiday "magalogue" and appropriate television and print campaigns.
Paul Pressler, president and chief executive officer of Gap Inc., said on the conference call that, during the past two years, Gap focused on building critical infrastructure and operating efficiencies "at the expense of creating amazing product and a compelling store experience." Now, he said, the company is "100 percent focused on the customer and improving product and the in-store experience."
In terms of product, Pressler said Gap and Old Navy specifically will adjust sourcing so that designers and merchants will work with vendors to chase trends and provide some updated product in stores faster than the company's typical nine-month pipeline.Looking to the current quarter, Pressler said the company is "not optimistic ... recognizing that it will take time to win back some of the customers that we've disappointed."
As such, Gap lowered its full-year earnings-per-share guidance to $1.12 to $1.17, down from a prior estimate for $1.30 to $1.34. Analysts are expecting a profit of $1.25 in the full year and 40 cents in the fourth quarter.
EXCLUSIVE: @tomford is opening its first-ever beauty store. The boutique, which opens November 20 in London’s Covent Gardens, was designed with the over-the-top glam Ford is known for. Read the full story on WWD.com, link in bio. #wwdbeauty #wwdnews (📷: Simon Wagner) #TomFordBeauty
New York-based DJ @harleyvnewton threw a party to celebrate the holiday collection of her dress and pajama line @hvn at the Ladurée Beverly Hills. It Girls @katebosworth, @rashidajones and more joined in on the fun, which included cocktails, croque monsieur sandwiches and a photo booth. #wwdfashion (📷: Owen Kolasinski/BFA.com)
For the holidays, @Burberry partnered with 20-year-old artist @blondeymccoy on a series of three outdoor murals in downtown Manhattan. The murals are McCoy’s interpretation of a Christmas eve party, the idea of charity and the spirit of family. His third mural, pictured here, is the most personal. The image depicts McCoy’s grandparents and father in London’s Trafalgar Square in the Seventies. “My work often features lots of sentimental objects.” #wwdeye
For spring 2018, designers applied bold colors and cartoonish motifs on everything from sneakers and belts to key chains. See all the top men’s accessories trends on WWD.com. #wwdtrends (📷: George Chinsee; Prop Styling by @rnasti; Market Editor: @luiscampuzano)
The @dior-sponsored @guggenheim international gala pre-party has a history of drawing cool-girl musical acts to serenade the crowd –– and last night was no exception. @haimtheband performed songs both new and old, and lured a star-studded audience with the likes of Rebecca Hall, Kate Mara, Mamoudou Athie and more. #wwdeye (📷: @lexieblacklock)
In a partnership between the @metopera and the @englishnationalopera, “Marnie” was born. The opera, with costumes sponsored by @mrporterlive, is an adaptation of the 1961 thriller by Winston Graham. Arianne Phillips, who created the costumes, is no rookie: She’s styled Madonna for her tours and created costumes for a myriad of films in the past. Read WWD’s interview with Phillips, where she talks about her inspiration for the opera’s costumes on WWD.com #wwdfashion
@barneysnyc took a different approach to their holiday windows this year. Instead of Christmas decor, Barneys tapped @thehaasbrothers to tell a story of positivity, gratitude and inclusivity via heartwarming silliness and humor. “It’s about kids and it’s about coming together and being family and loving each other,” said Simon Haas. #wwdfashion (📷: @joshuascottphoto)
Beauty influencer @kandeejohnson makes her foray into hair care with a collaboration with @ogx_beauty — making it the first time that OGX has teamed up for a product creation. The collab includes shampoos and conditioners in three scents. At 39 and a mom, Johnson is a different profile than the emerging social media stars, but is considered one of the pioneers of the digital beauty influencer world. Read WWD’s interview with her on wwd.com, including the strangest beauty product she’s ever tried #wwdbeauty