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.
“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.
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.”