Gap's Turnaround Efforts Drive Quarterly Beat in Surprise Early Announcement

FILE PHOTO: The Gap logo is seen on the front of the company's store on Oxford Street in London, Britain, July 1, 2021. REUTERS/John Sibley/File Photo
FILE PHOTO: The Gap logo is seen on the front of the company's store on Oxford Street in London, Britain, July 1, 2021. REUTERS/John Sibley/File Photo
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Gap's Turnaround Efforts Drive Quarterly Beat in Surprise Early Announcement

FILE PHOTO: The Gap logo is seen on the front of the company's store on Oxford Street in London, Britain, July 1, 2021. REUTERS/John Sibley/File Photo
FILE PHOTO: The Gap logo is seen on the front of the company's store on Oxford Street in London, Britain, July 1, 2021. REUTERS/John Sibley/File Photo

Gap on Thursday surpassed Wall Street expectations for the second quarter, as a surprise early announcement of its results showed shoppers turned to its Old Navy and namesake brands to snap up trendy and fashionable clothing.
Shares of Gap closed up nearly 2% at $22.8. The stock was halted during the day following a Bloomberg News report that said the apparel retailer's earnings press release and presentation appeared on its website in the morning, hours earlier than scheduled.
A Gap spokesperson told Reuters that the company's results were briefly and accidentally posted on its website due to an administrative error. It was originally scheduled to release the numbers after the bell.
The Banana Republic owner is in the midst of a brand turnaround under CEO Richard Dickson and has been ramping up its stores with fresher and more chic styles to bring back lost customers.
Dickson on a post-earnings call said Gap's consumer base has broadened and the company is seeing more sell-throughs at full-price, resulting in less discounting.
People, who are otherwise saving dollars and curbing spending on big-ticket items, are more than willing to go all out and spend on in-trend footwear and clothing such as those from Abercrombie & Fitch, Roger Federer-backed On and Deckers Outdoor's Hoka.
"(Gap) is being managed better than it was ... it is not like all four brands are really completely healthy, but they are trending in the right direction under the new management," Morningstar analyst David Swartz said.
Comparable sales at Old Navy rose 5% during the quarter, while the Gap brand posted 3% growth. Banana Republic sales, however, were flat as the brand continues to focus on fixing the fundamentals and improve its pricing and assortment architecture.
Gap's second-quarter net sales rose 5% to $3.72 billion, beating LSEG estimates of $3.63 billion.
It earned 54 cents per share, also topping analysts' average estimate of 40 cents.
The apparel retailer reaffirmed its annual net sales forecast and expects gross margin to expand by about 200 basis points versus its prior forecast of at least a 150-basis-point increase.



Uniqlo Owner Seen Posting 24% Annual Profit Surge on Brand’s Overseas Push

Fast Retailing's Uniqlo sign boards are displayed at a casual clothing store in Tokyo, Japan January 11, 2023. (Reuters)
Fast Retailing's Uniqlo sign boards are displayed at a casual clothing store in Tokyo, Japan January 11, 2023. (Reuters)
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Uniqlo Owner Seen Posting 24% Annual Profit Surge on Brand’s Overseas Push

Fast Retailing's Uniqlo sign boards are displayed at a casual clothing store in Tokyo, Japan January 11, 2023. (Reuters)
Fast Retailing's Uniqlo sign boards are displayed at a casual clothing store in Tokyo, Japan January 11, 2023. (Reuters)

The Japanese owner of casual wear giant Uniqlo is projected to beat its own forecast in what would be a third straight year of record profits as its brand makes inroads in western markets and its business in China recovers.

Fast Retailing's operating profit in the 12 months through August likely rose 24% from a year earlier to 478.3 billion yen, based on the average of 15 analyst estimates compiled by LSEG ahead of the company's earnings on Thursday.

That's marginally higher than the company's 475 billion yen forecast, which it lifted in July citing a strong performance in the second half.

Fast Retailing's shares have been on a tear, reaching a record high this week. Key factors going forward will be sales of fall and winter items in Japan and whether the company can reinvigorate its business in China, according to independent analyst Mark Chadwick.

"Investor attention will turn to whether Fast Retailing's measures in Greater China successfully reverse the earnings decline caused by weak consumer sentiment and increased competition," Chadwick wrote on the Smartkarma platform.

With more than 900 stores in China, Fast Retailing has long been seen as a bellwether for the retail sector in the world's second-biggest economy. COVID restrictions weighed on results there for years, but now the challenge is a sluggish economy that has weighed on consumer confidence.

Greater China CEO Pan Ning acknowledged in July that the market is maturing, with the company scaling back store openings and adopting a scrap and build strategy for underperforming locations.

When COVID lockdowns depressed sales in China, the company focused more on expansions in North America and Europe. Both sectors delivered strong sales and profits through the first nine months of fiscal 2024.

Company founder Tadashi Yanai aims to make Fast Retailing the world's biggest fashion retailer, with the operators of Zara and H&M standing in the way. He believes consumers are more focused on value than luxury in a post-COVID world, a trend that works in Uniqlo's favor.

Yanai, Japan's richest man, is scheduled to speak at the company's earnings briefing on Thursday, as well as Uniqlo president Daisuke Tsukagoshi, whom Yanai has spoken of as a possible successor.

Fast Retailing's shares have climbed 43% so far in 2024, outperforming a 16% advance in the benchmark Nikkei index.