By
Steve Muchoki
May 26th, 2023
Gap Inc’s new CEO Richard Dickson took over after the company reported an 8 percent drop in sales in Q2 to $3.55 billion, compared with $3.86 billion a year earlier.
Gap Inc (NYSE: GPS) shares closed Thursday trading at $9.53, down 1.24 percent from the day’s opening price. The losses were however recovered during the after-hours session with a rise of about 1.47 percent to trade around $9.67. The billion-dollar lifestyle brands company released its second quarter fiscal year 2023 financial results on August 24, which sparked mixed sentiments from the shareholders. In Q2 which ended on July 29, 2023, Gap reported adjusted earnings per share of about 34 cents compared with 9 cents expected by analysts surveyed by Refinitiv.
Notably, the company reported a revenue of about $3.55 billion during the second quarter, whereas analysts believed that Gap would release total sales of around $3.57 billion. Perhaps the most disappointing thing most shareholders resonated with was the projection of a double-digit decline in sales during the fiscal third quarter. Moreover, analysts surveyed by Refinitiv forecasted that the company would report third-quarter sales to drop by about 6.8 percent.
Gap Q2 2023 Financial Statements
During the second quarter, Gap announced its net sales declined by about 8 percent to $3.55 billion on a YoY basis. Specifically, the store sales declined by about 7 percent YoY. Gap announced that it closed the second quarter with about 3,456 store locations in over 40 countries, out of which 2,592 were company-operated. Meanwhile, the company announced that its online sales decreased by about 11 percent compared to last year, but represented about 33 percent of the total net sales during the second quarter.
The company announced an operating income of about $106 million and an adjusted net income of approximately $127 million during the second quarter. Nonetheless, the company urged investors to remain cautious with the mixed economic outlook.
“We are pleased to deliver meaningful operating margin expansion and strong free cash flow during the second quarter driven by modest market share gains, our significantly improved inventory position, and our actions to transform the company’s operating model and structure,” said Katrina O’Connell, Executive Vice President and Chief Financial Officer, Gap Inc. “While we are encouraged by our near- term progress, we remain mindful of the mixed economic and consumer environment in which we are operating and continue to plan the business prudently.”
Forward, Gap sets images that the third quarter net sales will decline in the low double-digit range compared to last year’s net sales of about $4.04 billion. Additionally, the company anticipates that fiscal 2023 net sales could decrease in the mid-single digit range compared to last year’s net sales of $15.6 billion.
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