Old Navy comps were up in October.

Gap Inc., enduring a tough year, reported a net loss of $184 million in the fourth quarter ended Feb. 1 compared with a net income of $276 million in the year-ago quarter.

Fourth-quarter sales were up 1 percent to $4.7 billion; comparable sales were down 1 percent.

By division, Old Navy’s comparable sales were flat; Gap Global was down 5 percent; Banana Republic was flat, and Athleta was up 2 percent.

For all of 2019, net income fell to $351 million, from $1 billion in the previous year. Sales were down 1 percent to $16.4 billion; comparable sales were down 1 percent.

“While fiscal 2019 was a challenging year, I am proud of our teams and their commitment to Gap Inc.,” said interim chief executive officer Bob Fisher. “Thanks to their efforts, we began to see stabilization in our business in the fourth quarter, driven primarily by improvement in Old Navy’s performance. The current environment presents new challenges, but I am confident in Sonia’s leadership and her ability to deliver the transformational change required.”

Last week, Gap Inc. said Sonia Syngal would become chief executive officer of the corporation on March 23, succeeding Art Peck, who was pushed out last November. She was ceo of the Old Navy division. The company also said board member Bobby Martin would become executive chairman, succeeding Fisher who was also serving as interim ceo.

In other changes revealed today, Nancy Green will step up to lead Old Navy while a search for the division’s next president and ceo is under way. She could become the next ceo of the division since Gap Inc. is considering both internal and external candidates. In addition, Mark Breitbard will lead the company’s specialty brands as well as the Asia business and franchising. Both changes are effective March 23.

Katrina O’Connell, chief financial officer of Old Navy, will become cfo of the entire corporation, succeeding Teri List-Still, after a transition period.

The company contemplates a loss of about $100 million in sales and 10 cents in diluted earnings per share in the first quarter of 2020 due the impact of the coronavirus in Europe and Asia. The company said it was not possible to estimate the virus impact further into the year due to the uncertainty of the situation. The company also expects to close about 170 Gap stores around the world this year, but net closings would be about 90 due to openings and repositioning.

Last January, the group scrapped its plan to spin off Old Navy into a separate public company due to the division’s recent disappointing performance, costs associated with the spin-off and market conditions.

During a conference call, List-Still, said Gap Inc. is in “an important period of transition,” referring to the sweeping top-level management changes this month, as well as the continued store closings, execution issues, and continued investments in Old Navy and Athleta where the company is most optimistic.

“The company has “a change in the operating strategy” for Gap flagships and is working on some flagship closings, including four this year, she said. Gap reported a fourth-quarter $296 million non-cash impairment charge, primarily stemming from the Times Square, New York City flagship, which opened in 2015 and has a lease through 2032. There are 31 Gap flagships accounting for 3 percent of sales and a 110 basis point drag on operating earnings, or $120 million.

Overall, the corporation plans to close 230 stores by end of 2020, at a cost of $250 million to $300 million.
“Discussions with landlords are difficult,” List-Still said.

Regarding coronavirus related impact, the cfo said, 16 percent of Gap Inc. products are sourced in China and that’s down from 21 percent in the year before, though she added there is still significant amount of fabric production in mills in China. On the retail side, the virus has had the most impact in China which accounts for 3 percent of global sales. In the U.S., “we are starting to see some impact on traffic here.”

Discussing divisions, the cfo said Old Navy drove the majority of the earnings decline last year though its women’s business had positive comps and active wear was up double digits. She said the “fundamental health of the brand remains strong” and that the company is “laser focused on traffic as a priority.” There is also now a stronger focus on data analytics which have not been exploited much in the past, to bolster personalization, segmentation and loyalty efforts. She said the division entered 2020 with improvement in product acceptance and tighter inventories.
Regarding Gap, the brand has made progress tightening inventory, expanding margin and reducing costs, however some meaningful execution issues impacted the business, she added, noting poor marketing, an inconsistent product point of view, and lack of brand clarity. She said “overall profitability became challenging.”
At Banana Republic, 2019 was disappointing, with sophisticated inventory planning resulting in a sub-optimal mix, though corrections are being made.
Athleta, was characterized as “a gem in our portfolio, finishing 2019 just shy of $1 billion in sales, but not its strongest year.” The cfo cited some “lingering impact of assortment mix challenges including being light on bottoms and heavier on tops and outerwear. Despite challenges, the brand gained market share she said. Girls’ bottoms, novelty items and limited edition products were standouts last quarter. The chain has 190 stores and plans to open 20 this year in line with the pace of past years.
Syngal summed up where Gap is at, stating, “We have fallen short on execution and have not fully monetized our brands and assets and the capabilities we have invested in. But I believe in the potential of the company and our team.”
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