Gap GPS Q1 earnings report 2023

Gap reported another quarter of net losses and declining sales across its four brands but the retailer insisted it’s making progress – and has managed to significantly improve its margins.

Here’s how the apparel retailer did in its fiscal first quarter compared with what Wall Street was anticipating, based on a survey of analysts by Refinitiv:

• Earnings per share: 1 cent, adjusted (it wasn’t immediately clear whether it was comparable to estimates)
• Revenue: $3.28 billion vs. $3.29 billion expected

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For the three-month period that ended April 29, the company reported a loss of $18 million, or 5 cents per share, compared with a loss of $162 million, or 44 cents a share, in the year ago period. On an adjusted basis, the company reported earnings of $3 million, or 1 cent per share, in the period. 

Sales dropped to $3.28 billion, down 6% from $3.48 billion a year earlier. 

Shares of the company jumped more than 14% in after hours trading.

Gap – which includes its namesake brand, Old Navy, Banana Republic and Athleta – has been without a CEO for nearly a year as it worked to restructure the business, understand its consumers better and get back to profitability. 

The company said that work is well underway but acknowledged it has long been needed. While it knew what the solutions were, those fixes have been delayed or derailed for too long and too many times, it said.

Last month, it told investors it will lay off about 1,800 employees, more than three times as many as the 500 layoffs it announced in September, as part of a broad effort to cut costs and streamline operations.

Between this year and last, the company has cut 25% of its headquarters roles, which has increased the number of direct reports each manager has from 2 to 4 and reduced management layers from 12 to 8, the company said. 

The cuts remove layers of red tape and bureaucracy that will allow Gap to be more nimble in its decision making and focused on its creative efforts, the company said. 

In March, it also announced a major leadership shakeup. Athleta CEO Mary Beth Laughton left the company and its chief growth officer role was eliminated. Gap announced its chief people officer Sheila Peters would also be leaving, albeit at the end of the year. 

In its most recent quarter, comparable sales were down 3% and store sales decreased 4% compared to last year. 

Online sales, which represented 37% of total net sales, also dropped 9% year over year, but the company said that’s because sales trends are getting more in line with what’s historically normal after the Covid pandemic led to an industry-wide jump in ecommerce. Digital sales are up “significantly” to pre-pandemic levels, the company said. 

In the year ago period, many retailers were still battling pandemic-related supply chain issues and it landed Gap with a glut of inventory they had trouble selling…