Gap Inc. reported second-quarter comparable sales and revenue that missed the average analyst estimate, underscoring ongoing weakness at the retailer’s four brands.
The results come three days into Chief Executive Officer Richard Dickson’s tenure, who joined the company from Mattel Inc. after his success with the Barbie franchise. While Dickson has yet to lay out a vision for the future of Gap, he’s expected to bring stability to a company that has faced leadership upheaval in recent years amid prolonged weakness.
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“We have to do things differently, with a clear focus on redefining our brands’ meaning to consumers, focusing on creativity, designing for relevance as a pursuit rather than a goal, and leveraging our remarkable legacy,” Dickson said in a statement.
Comparable sales fell 6% across Gap’s four brands in the second quarter, a third consecutive drop. That was due mostly to large declines at Old Navy, Banana Republic and Athleta. Net sales also narrowly missed the average estimate.
Inventories fell 29% from a year ago, suggesting that Gap continues to make improvements to its assortment after facing an inventory pileup last year.
Sales at Old Navy, Gap’s largest segment, were pressured by “softness in the active category as well as continued slower demand from the lower-income consumer,” the company said.
Athleta, which in recent years had supported the company’s growth, faced “product acceptance challenges,” Gap said in its statement, adding it has taken actions to improve performance. The brand appointed Chris Blakeslee, a former executive at the buzzy activewear company Alo Yoga, as its CEO last month.
Earnings per share, excluding some items, were 34 cents, compared with the average analyst estimate of 10 cents. For the full year, Gap now expects net sales will decrease in the mid-single digit range from a year earlier. The company sees third quarter sales down in the low double-digit range, in part due to the sale of Gap China earlier this year.
The shares were little changed in late trading in New York.
Chairman Bob Martin, who has served as interim CEO, executed a restructuring plan that’s expected to save $300 million in annual expenses. But reinvigorating Gap’s brands will take more than cost savings. Investors will be watching closely for details of Dickson’s turnaround plan in the coming quarters as he settles into the top job.
Gap’s report follows mixed results from other apparel retailers. While department stores including Macy’s Inc. and Kohl’s Corp. also showed sales declines, specialty stores like Abercrombie & Fitch Co. and Urban Outfitters Inc. have held on to shoppers and reported sales growth.
(Adds chart and details on Old Navy and inventories in fifth and sixth paragraphs. An earlier version of this story corrected the financial metric missing estimates in the headline.)