Gap Smashes Revenue, Profit Estimates; Post Comp Sales Gains Across All Brands

Gap Inc. reported a much better than expected first quarter and raised its full-year outlook amid evidence that CEO Richard Dickson’s efforts to turnaround the company are taking hold.

The apparel giant swung to a profit and, for the first time in years, posted same-store sales gains across all four of its banners: Gap, Old Navy, Banana Republic and Athleta.  

“Gap Inc. delivered a strong quarter that exceeded expectations across key metrics,” said Dickson, who became CEO in August 2023. “We gained market share for the fifth consecutive quarter with positive comparable sales at all brands, demonstrating improved relevance with our customers as we execute against our brand reinvigoration playbook.”

Net income totaled $158 million, or $0.41 per share, for the quarter ended May 4, compared to a loss of $18 million, or $0.5 per share, in the year-ago period. Analysts had expected earnings per share of $0.15. Operating income was $205 million, compared to an operating loss of $10 million in the same period last year.

Net sales rose 3% to $3.39 billion from $3.28 billion, ahead of estimates of $3.29 billion.

Comparable sales increased 3%. Store sales increased 3% compared to last year, while online sales increased 5% and represented 38% of total net sales.

The retailer ended the quarter with inventory at $1.95 billion, down 15% compared with the year-earlier period.

Here is a breakdown of Gap’s sales by brand.

•Old Navy: Net sales of $1.9 billion were up 5% compared to last year; comparable sales were up 3%. It was the banner’s third consecutive quarter of positive comparable sales.

•Gap: Sales of $689 million were flat compared to last year. Comparable sales were up 3%, the second consecutive quarter of positive gains. Gap’s performance was primarily driven by strong marketing and product execution centered around its Linen Moves campaign, the company said.

•Banana Republic: Sales of $440 million rose 2% compared to last year. Comparable sales were up 1%.

“The brand's continued focus on fixing the fundamentals drove sequential improvement in performance compared to the fourth quarter,” the company said.

•Athleta: Sales of $329 million rose 2% compared to last year. Comparable sales were up 5%   The company expects net sales in the second quarter to be challenged as the brand laps last year's quarter of heavy discounting.

As a result of its “strong” first quarter results, Gap said it was increasing its outlook for fiscal 2024, “reflecting higher net sales and meaningfully higher operating income growth compared to its prior expectations.”

The company now expects sales to be up “slightly,” compared to its previous forecast for roughly flat sales. Operating income is expected to increase in the mid-40 percent range, compared to its previous forecast  of low- to mid-teens growth.

Gap ended the quarter with 3,571 stores in over 40 countries, of which 2,554 were company operated.