Betting on Athleta and Old Navy Brands
The fashion company reported it earned $234 million, or $0.61 per share, for the quarter that ended January 30. The reported earnings per share include about $0.45 for non-recurring tax benefits and around $0.12 for impairment charges.
Still, this is much better than a loss of $184 million, or $0.49 per share, reported a year ago. Analysts were expecting the fashion business to report a profit of $0.18 per share.
However, the company reported a miss on business revenue as it recorded sales of $4.42 billion, representing a 5% decline from the $4.67 billion reported a year ago. The Wall Street consensus for this business metric was $4.66 billion.
Gap said it witnessed a very strong performance from its Athleta brand. Sales in this business division soared 26% year-over-year (YOY), while another flagship brand of the company, Old Navy, witnessed a 7% surge in same-store sales. On the other hand, sales in the Banana Republic brand fell as much as 22%.
Gap is looking to capitalize on the soaring sales in Athleta and Old Navy business units, and it plans to open 30 to 40 Old Navy stores and 20 to 30 Athleta stores in 2021. On the other hand, it will work to close around 100 Gap and Banana Republic stores globally.
“Our powerful brands moved to offense with purpose-led marketing and strength in relevant categories, like Active and Fleece, allowing us to gain meaningful market share quarter-over-quarter in a fragmented environment. This was enabled by our $6 billion online business and advantaged digital capabilities allowing us to expand our reach to more than 183 million customers this year,” said Sonia Syngal, Chief Executive Officer of the company, in a statement.
Online sales rose 49% in the quarter to now account for 46% of all sales. Looking forward, the fashion company is projecting to make a profit between $1.20 and $1.35 per share in 2021, with the midpoint of this range coming in slightly lower compared to analysts’ estimates of $1.28 per share.
Net sales are expected to be “up a mid- to high-teens percentage compared with 2020,” the company said in a statement. On the other hand, the market analysts were expecting the company to report a YOY business revenue growth of 14.1%.
Today, Gap stock (GPS) surged over 5% in pre-market trading.
Gap reported stronger-than-expected earnings for its Q4 on higher same-store sales of its Athleta and Old Navy brands.