Gap Inc., continuing to suffer from declining market share and product acceptance, reported a fourth-quarter loss that was much steeper than a year ago and disclosed a string of high-level management departures.
Gap lost $273 million for the quarter ended Jan. 28, compared to a loss of $16 million in the year-ago period. Net sales of $4.24 billion were down 6 percent compared to last year, inclusive of an estimated one-point foreign exchange headwind. Net sales were in line with the company’s expectations for midsingle-digit declines in the quarter.
Comparable sales were down 5 percent year-over-year, with store sales down 3 percent and online sales decreasing 10 percent. Online sales represented 41 percent of total sales.
Senior-level executives who left the company are chief growth officer Asheesh Saksena, and Mary Beth Laughton, president and chief executive officer of Athleta. The company also said that Sheila Peters, chief people officer, will leave the group at the end of the year.
The news of the day dragged Gap’s stock down 4.9 percent, or 68 cents, to $10.90, in after-market trading.
“To enter fiscal 2023 in a more competitive position, we took quick and effective action to clear excess inventory, improve assortment balance, particularly at Old Navy, and to meaningfully optimize our cost structure, resulting in $550 million in annualized savings identified to date,” said Bob Martin, Gap Inc. executive chairman and interim CEO, in his statement Thursday afternoon. “The board is getting close to choosing the next CEO for Gap Inc. As a result of the work we have underway to build a stronger foundation and restore the company’s creative muscle, we are optimistic that this will provide our new leader with a quicker ramp in driving consistent, profitable growth over the long term.”
By division, Old Navy’s fourth-quarter net sales of $2.2 billion were down 6 percent compared to last year. Comparable sales were down 7 percent. Officials cited demand softness from the lower-income consumer and in the kids and baby category, which was partially offset by strength in the women’s category. As stated last quarter, the company believes that Old Navy pulled forward sales from the fourth quarter to October as a result of its efforts to get out earlier than typical with its initial holiday promotional event, which also impacted growth in the quarter.
At the Gap division in the fourth quarter, net sales of $1.1 billion were down 9 percent; comparable sales were down 4 percent. The shutdown of Yeezy Gap negatively impacted growth in North America by about 2 percentage points. Softness in the kids and baby categories were offset by strength in women’s.
Banana Republic’s fourth-quarter net sales were $578 million, down 6 percent compared to last year. Fourth-quarter comparable sales were down 3 percent, driven by softness in outerwear and sweaters as well as its holiday gifting assortment.
“While dresses and suiting drove comp growth in the quarter, the company remains mindful of the fact that BR has been a beneficiary of the shift in consumer preferences to occasion and work-based categories as people go back to work and events post-COVID[-19],” the company indicated in its statement.
At Athleta in the fourth quarter, net sales of $436 million were down 1 percent compared to last year and comparable sales were down 5 percent driven by continued product acceptance challenges.
Last July, Gap Inc.’s former CEO and president Sonia Syngal was forced out. Troubles continued in September when Gap parted ways with Kanye West — and a lucrative partnership with the Gap Yeezy line — after both parties were unable to see eye-to-eye and the entertainer subsequently made increasingly erratic statements. That same month, Gap slashed roughly 500 jobs, mostly in its corporate offices. In the third quarter last year, Gap Inc. announced $250 million in annualized savings. Over the last six months, the company has identified $550 million in annualized savings in total.
Officials said the company sees further ways to optimize its marketing spend and rationalize its technology investments over the next few years. They’ve been working with external advisers on these efforts “with the overall intention of optimizing and simplifying its operating structure to drive profitability and cash flow over the long term,” the company indicated.
“We moved swiftly in fiscal 2022 to manage the levers in our control and took action to drive immediate and long-term improvements in our business during what proved to be a challenging year. While we are better positioned as we enter fiscal 2023, we continue to take a prudent approach to planning and managing our business in light of the continued uncertain consumer and macro environment,” said Katrina O’Connell, executive vice president and chief financial officer. “We are confident that our continued actions to further optimize our operating model and cost structure are key steps toward positioning Gap Inc. back on its path towards sustainable, profitable growth and delivering value for our shareholders over the long term.”
The company is estimating first-quarter net sales could decrease in the midsingle-digit range compared to last year’s net sales of $3.5 billion. The sale of Gap China to Baozun closed on Jan. 31. First-quarter 2022 net sales included about $60 million in sales for Gap China.
The company anticipates that fiscal 2023 net sales could decrease in the low- to midsingle-digit range compared to last year’s net sales of $15.6 billion. Fiscal 2022 net sales included about $300 million in sales for Gap China. Fiscal 2023 will include a 53rd week estimated to positively impact net sales by $150 million.
For all of 2022, Gap Inc. reported $15.6 billion in sales, compared to $16.7 billion in sales in 2021. There was a net loss of $202 million, compared to a net loss of $256 million in 2021.