Gap posts sales decline in Q4, expects recovery in 2021

Gap’s diluted earnings per share were 61 cents for the fourth quarter of fiscal year 2020. The company said, net sales were 4.4 billion dollars, a decrease of 5 percent compared with last year, while online sales grew 49 percent compared with last year and represented 46 percent of net sales in the fourth quarter, which was an increase of over 17 percentage points versus last year. Store sales declined by 28 percent in the quarter, while comparable sales remained flat.

“Our powerful brands moved to offense with purpose-led marketing and strength in relevant categories, like Active and Fleece, allowing us to gain meaningful market share quarter-over-quarter in a fragmented environment,” said Sonia Syngal, Chief Executive Officer, Gap Inc., adding, “We are focused on executing against our Power Plan 2023 and delivering profitable growth in 2021.”

Q4 sales performance of brands under Gap portfolio

Old Navy Global net sales increased 5 percent, with comparable sales up 7 percent. The company added that online growth and significant improvements to last year in both markdown rate and units per transaction offset store traffic challenges. Momentum continued in casual and cozy categories with strong performance compared to last year in Active, Fleece, and Sleep.

Gap Global net sales were down 19 percent and comparable sales were down 6 percent, as Gap brand’s global footprint was impacted by Covid-mandated store closures and restrictions in Canada, China, Europe and Japan, while North America comparable sales were positive.

Banana Republic Global net sales were down 27 percent and comparable sales were down 22 percent. Athleta net sales increased 29 percent with comparable sales up 26 percent.

Gross margin was 37.7 percent, an increase of 190 basis points versus last year, ahead of the company’s prior outlook of being flat versus the year-ago quarter.

Gap’s fiscal 2020 business highlights

The company delivered over 6 billion dollars in sales online, reflecting 54 percent annual sales growth. Online sales represented 45 percent of total sales versus 25 percent in 2019. The company surpassed 1 billion dollars in sales at Athleta with 16 percent annual sales growth.

Improved store fleet economics by closing a net of 228 Gap and Banana Republic stores globally, ahead of its 225 target and refreshed in-store environment in 71 Gap stores.

For fiscal year 2021, the company expects diluted earnings per share to be in the range of 1.20 dollars to 1.35 dollars. The company expects fiscal year 2021 net sales to reflect mid- to high-teens growth versus fiscal year 2020, which assumes Covid impacts persisting in the first half of 2021 and a return to a more normalized, pre-pandemic level of net sales in the second half of 2021. The company expects to deliver operating margin of approximately 5 percent in 2021.

Image:Gap resources