Global clothing retailer Gap saw its share price slump nearly 12% in after-hours trading as third-quarter earnings missed expectations.
While the company saw online sales surge 61% for the three months to 31 October, as people shopped remotely during the pandemic, it was not enough to get earnings up to expectations.
The company reported earnings per share of $0.25, missing the $0.32 forecast by 22%, based on Refinitiv data.
Third-quarter like-for-like sales increased 5%, beyond the circa 0.3% decline analysts had been anticipating.
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Gap reported sales gains at Old Navy, its brand that has benefited as people stuck at home have spent more on comfortable clothing, and the highest ever sales at Athleta, its brand for women’s workout clothes, though this was offset by higher marketing costs and double-digit declines at the namesake Gap and Banana Republic businesses which Gap is attempting to turn around.
Guided by CEO Sonia Syngal, Gap’s shares have surged during the pandemic, confounding the sceptics who’ve previously criticised the company’s dull brand image and addiction to discounting, driven higher by a flourishing digital business and successful advertising investment in advertising.
‘Our third quarter results reflect our Power Plan 2023 in action - specifically the strength of our online business, which comprised 40% of sales, and our commitment to meeting the shopping preferences of our customers through our leading omni-platform,’ enthused Syngal.
‘With our teams focused on sales growth and returning to profitability, we’ve made investments in demand generation that are driving engagement, particularly in this dislocated market as customers are looking to trusted brands to provide easy and safe shopping options.’
Although the pandemic has made it tough for companies to give forward-looking guidance, America’s second largest apparel e-commerce business ‘remains optimistic’ for the fourth quarter, though Gap also cautioned that the rising number of Covid-19 cases around the globe ‘may impact store traffic’.