Gap reported third quarter net sales of 3.8 billion dollars, down 7 percent compared to last year, inclusive of an estimated 2 percentage points negative impact from the sale of Gap China. Comparable sales for the quarter were down 2 percent.
The company is estimating fourth quarter net sales to be flat to slightly negative compared to last year and fiscal 2023 net sales could be down in the mid-single digit range.
"Gap Inc. delivered a solid performance in the third quarter. We were pleased to see market share gains as well as improvements in both gross margins and operating margins, demonstrating our ability to drive operating and financial discipline," said Gap president and CEO, Richard Dickson in a statement.
Highlights of Gap’s third quarter results
The company’s store sales decreased 6 percent compared to last year. Gap ended the quarter with 3,533 store locations in over 40 countries, of which 2,598 were company operated, while online sales decreased 8 percent compared to last year and represented 38 percent of total net sales.
Gross margin for the quarter of 41.3 percent increased 390 basis points versus last year's reported gross margin and increased 260 basis points versus last year's adjusted gross margin.
The company’s reported operating income was 250 million dollars and reported operating margin was 6.6 percent, while adjusted operating income was 255 million dollars; while adjusted operating margin was 6.8 percent.
Reported net income reached 218 million dollars with reported diluted earnings per share of 58 cents and adjusted net income was 221 million dollars and adjusted diluted earnings per share were 59 cents.
Gap posts sales decline across brand portfolio
Old Navy net sales of 2.13 billion dollars, were down 1 percent compared to last year. The brand saw strength in women's and kids and babies during the quarter, as well as an acceleration in the active category. Brand’s comparable sales were up 1 percent.
Gap brand net sales of 887 million dollars, were down 15 percent, while excluding the estimated negative impact from the sale of Gap China and the shutdown of Yeezy Gap, net sales were down about 6 percent and comparable sales were down 1 percent.
Net sales at Banana Republic of 460 million dollars declined 11 percent and comparable sales were down 8 percent.
Athleta net sales of 279 million dollars, were down 18 percent compared to last year and comparable sales were down 19 percent.
The company now expects to open a net total of 15 to 20 Old Navy and Athleta stores in fiscal 2023 and expect to close a net total of about 50 Gap and Banana Republic stores this year, completing its plan to close 350 Gap and Banana Republic stores in North America by the end of fiscal 2023.