The Easter Bunny gave Gap Inc. a black eye in March, hitting Banana Republic particularly hard.
Investors pushed shares of the company down 8.6 percent to $25.32 in after-hours trading Thursday after the company said poor store traffic and a weak Easter selling season left it with an excess of inventory, pressuring first-quarter gross margins.
Gap’s net sales for the five weeks ended April 2 fell 6.5 percent to $1.43 billion from $1.53 billion a year earlier. Comparable sales fell 6 percent, with Banana Republic comping down 14 percent, Old Navy dropping 6 percent and the flagship Gap brand declining 3 percent.
Overall, the company said the traffic decline in March exceeded its comp decline.
Banana Republic is in the midst of a fashion recalibration, having dismissed Marissa Webb as creative director in the fall. The brand sought to lead on fashion and trend, but misjudged its consumer and is now again focused on styles it considers more classic and appropriate.
Sabrina Simmons, the company’s chief financial officer, tried to emphasize better times ahead and said, “While March proved challenging, we remain focused on taking the necessary steps to improve results across the portfolio throughout the year.”
In a recorded call for investors, a Gap spokesman said that while weaker store traffic impacted the namesake division’s sales, there were signs that shoppers were warming to the brand’s spring assortment.
In February, Gap’s chief executive officer, Art Peck, acknowledged a series of fashion “misses” last year that hurt Old Navy and Banana Republic — from too many sweaters to armholes on jackets that were too small.
Earnings for the year fell 27 percent to $920 million on sales of $16.2 billion.
“With a year of transition behind us, I’m confident that we have the right strategies in place to fuel our long-term growth,” Peck said. “We made significant progress in 2015 transforming our product operating model, enabling us to be more responsive to trends and market conditions and consistently deliver on-brand product collections.”
In February, Gap’s goals for this year included driving positive comps, taking a less promotional stance and keeping inventories down. The read on March suggests the company has ground to make up in all of those areas.
It’s been a tough week in the headlines for Gap. The company also had to take down a Twitter post featuring an ad from GapKids x ED, the retailer’s partnership with Ellen DeGeneres, after users complained it had racist undertones.