SAN FRANCISCO – Gap shares tumbled in after-hours trading Monday after the struggling retailer reported worse-than-expected sales, issued a profit warning for the first quarter, and announced that it is mulling options for its business outside North America.
The San Francisco-based retailer said that sales in April at stores open at least a year — a key metric of a retailer’s health — fell 7 per cent. That fell short of analyst expectations for growth of 0.5 per cent, according to Thomson Reuters.
Sales at established stores at all the company’s three chains — Gap, Banana Republic and Old Navy — declined, and total sales for the month were $1.12 billion, down from $1.21 billion last year. By division, Gap’s sales for the key metric fell 4 per cent, while that figure was down 7 per cent for Banana Republic. At Old Navy, the metric was dropped 10 per cent.
First-quarter sales totalled $3.44 billion, down 6 per cent from $3.66 billion a year earlier.
The company now expects to earn 31 to 32 cents per share for the quarter. The average analyst estimate was for earnings of 44 cents per share on revenue of $3.54 billion, according to FactSet.
The results underscore the continued challenges that CEO Art Peck confronts in turning around the business. Gap has long been struggling to turn around its namesake business and improve sales at the company. Peck took over the CEO helm in February 2015 and had promised business would start to perk up this spring, as it worked hard to spruce up its fashions. But any improvement in sales has failed to happen. Last month, Gap said that it had entered into April with more inventory than planned because of weaker-than expected traffic that began in late March.
In a statement Monday, Peck said, “We are committed to better positioning the business to recapture market share in North America and to capitalizing on strategic international regions where there is a strong runway for growth.”
Gap said that it is looking for ways to be more efficient and improve operations. It is also weighing options for its international Banana Republic and Old Navy stores. It plans to announce more details when it reports quarterly results May 19.
Shares of Gap Inc. tumbled more than 10 per cent in after-hours trading to $19.50. A year ago shares traded at $39.61.
The company is expected to report final first-quarter financial results on May 19.