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Old Navy drives better-than-expected sales rise at Gap Inc

Gap Inc has lifted its earnings forecast for this fiscal year after its third-quarter sales beat analysts’ expectations.

Net sales edged up 1% to $3.84bn (£2.89bn) in the quarter, compared with the same period last year.

“We continue to make progress against the balanced growth strategy we outlined in September, driving efficiency at our more mature brands, while growing our footprint in the value and active space, and investing in our online and mobile experience,” said Art Peck, president and chief executive officer of Gap Inc, which owns Gap, Old Navy and Banana Republic. 

Like-for-like sales at the US retail group rose 3% in the third quarter, compared to a 1% decline in the same period last year.

Old Navy enjoyed the biggest growth in like-for-likes, up 4%. Sales at the Gap brand increased by 1% compared to a 4% decline in the same quarter last year and Banana Republic saw sales dip by 1%, compared with a 6% slump last year.

Neil Saunders, managing director of retail analyst Global Data, said that on the surface the results were ”not too bad”. However, he pointed out that the Gap brand is still facing serious challenges.

“Old Navy is driving group performance while the other two leading brands are struggling. Admittedly, the 0.8% US revenue decline at Gap and the 2.6% dip at Banana Republic are better than recent reporting periods, but neither is demonstrative of a fully-fledged recovery.

“Management has been keen to emphasize the changes that are being made to revitalize the challenged brands. On the ground, there is some evidence of this happening. At Gap, for example, there have been marginal improvements in quality and greater emphasis has been placed on in-demand products like athletic wear.

“However, the majority of the offer remains samey, as do things like store environments and point of sale material. In our view, Gap has very little newness to communicate and, as such, is still finding it difficult to inspire customers.”

 

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