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.
@tradesy is turning the concept of a showroom upside down with its new space in Santa Monica. Here, the company plans to hold events, art exhibits and a showcase rare fashion pieces like this Louis Vuitton boxing set. Get all the details on Tradesy’s first showroom on WWD.com. #wwdnews
Spotted last night at the @erdem x @hm launch event: Kate Bosworth, Rashida Jones, Kirsten Dunst and Selma Blair. The party, which took place in LA, also marked the opening of their pop-up shop. “I was interested in creating a collection that wasn’t in any way disposable. It was about pieces you’d create and keep forever, things that have a permanence to it,” designer Erdem Moralioglu said. #wwdeye (📷: Katie Jones)
Renee Zellweger in yellow in 2001 and again in 2017. Chosen as one of the 12 @pantone Leading Spring Colors (and dubbed “Meadowlark”), it only makes sense that the bright hue stands the test of time and is making a resurgence this season, seen already on stars like @blakelively and @gigihadid. (📷: Donato Sardello & @rexfeatures) #wwdfashion #tbt
Dior’s 70th anniversary celebration continues with a new exhibition at the Royal Ontario Museum in Toronto. “Christian Dior,” which is scheduled to run through March 18, takes a look at the founders tenure from 1947 to 1057 and feature 40 designs. Pictured here is an evening gown from the Ailée, fall 1948-49 haute couture collection. #wwdfashion (📷: Brian Boyle)
As one of the most recognizable models in the world, Christy Turlington Burns has an insider’s view of the fashion industry and the allegations of sexual harassment swirling around it. “I can say that harassment and mistreatment have always been widely known and tolerated in the industry. The industry is surrounded by predators who thrive on the constant rejection and loneliness so many of us have experiences at some point in our careers,” Turlington told WWD, along with her suggestions for how the modeling world should protect younger women and men. Read more on WWD.com. Link in bio. (📷: Tony Palmieri) #wwdnews
@asics America has tapped a new brand ambassador: famed DJ/record producer @steveaoki. This initiative is intended to set the tone for the new brand identity and philosophy and will include partnerships with influencers and in-store and off-line activations that will continue into next year. This is Asics’ most significant marketing effort in two decades, and is expected to attract younger consumers to the brand. #wwdfashion
24-year-old Jean Prounis is redefining the rules of jewelry. Formerly a studio assistant to Jemima Kirke and a design apprentice at Ghuran, she focuses on handcrafted subtleties and ancient goldsmithing techniques. “There was a really sterile feel in the environment and I wanted to have jewelry with character that shapes how you wear it everyday,” Prounis said. Each piece is hand made in New York, either by Prounis or three other jewelers in the district. #wwdfashion
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews