Gap announces big loss, declining sales and executive shakeup

Gap reported disappointing holiday-quarter results Thursday and announced a series of executive changes as the struggling retailer continues to search for a permanent CEO.

Shares of the company fell in off-hours trading.

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

• Loss per share: 75 cents, vs. 46 cents expected
• Revenue: $4.24 billion vs. $4.36 billion expected

The company’s reported net losses for the three-month period that ended Jan. 28 was $273 million, or 75 cents a share, compared with a loss of $16 million, or 4 cents per share, a year ago.

Gap reported sales of $4.24 billion, down 6% from $4.53 billion a year earlier. Comparable sales were down 5% year-over-year and store sales dropped 3%. Online sales, which represent 41% of total net sales, plummeted 10% compared to last year, the company said.

The apparel retailer — which includes its namesake brand, Old Navy, Banana Republic and Athleta — has had a rough year as it grappled with numerous net losses, bloated inventory levels and a search for a permanent CEO. The company said it is “getting close” to picking its next chief executive.

The company also said it is eliminating its chief growth officer role, which has been held by Asheesh Saksena, effective Thursday. The Athleta brand’s CEO, Mary Beth Laughton, also left the company Thursday.

“We believe Athleta has incredible potential, but it has suffered from product acceptance challenges
over the past several quarters,” Gap interim CEO Bob Martin said in a release. “As we look to capitalize on this potential and remain competitive amidst a dynamic landscape, we believe now is the right time to bring in a new leader who can position Athleta for long-term success.”

Chief People Officer Sheila Peters is also leaving, albeit at the end of the year.

This time last year, Gap struggled to get products on the shelves amid worldwide supply chain constraints and ended up flying in apparel to keep up with demand. Still, backlogs and delays kept inventories in transit so by the time it finally arrived, it was out of season or out of style, forcing the company to offer steep discounts, which has cut into profits.

In a bright spot for Gap on Thursday, though, the company reported that inventory declined 21% year-over-year.

Overall, net sales for the year dropped to $15.62 billion compared to $16.67 billion in the prior fiscal year. Net losses for the year came in at $202 million, compared to a net income of $256 million in the prior fiscal year.

Gap had originally forecast adjusted per share earnings of $1.85 to $2.05, with sales growing at a low single digit percentage rate for the fiscal year. It slashed that guidance and then withdrew it altogether halfway through the year amid plunging sales.

The company said it withdrew the outlook because of the uncertain macroeconomic environment and its ongoing efforts to make changes and find a new CEO.

In July, Sonia Syngal abruptly stepped down as chief executive. The company has yet to find a permanent replacement. Martin, the retailer’s executive chairman, has been serving as interim CEO in the meantime.

In the previous quarter, Gap sustained $53 million in impairment charges after Ye, the rapper formerly known as Kanye West, terminated his contract with the retailer citing apparent contract breaches and a lack of creative control. In late October, Gap removed all Yeezy products from its stores after Ye made anti-Semitic remarks.

Read the full earnings release here.