Gap posts profit in FY21, reveals positive earnings forecast

Gap Inc. said reported diluted loss per share for the fourth quarter was 4 cents, while adjusted diluted loss per share was 2 cents. Fiscal year 2021 reported diluted earnings per share were 67 cents and adjusted diluted earnings per share were 1.44 dollars.

The company’s fourth quarter net sales of 4.5 billion dollars were down 3 percent compared to 2019, while comparable sales were up 3 percent versus 2019 and 3 percent year-over-year. Fiscal year 2021 net sales of 16.7 billion dollars represented a 2 percent increase versus fiscal year 2019, while comparable sales grew 8 percent versus 2019 and were up 6 percent year-over-year.

“After two years of restructuring, including divesting smaller non-strategic brands, transitioning our European market to an asset-light partnership model and shedding underperforming North American stores, our core business is strong and we are poised for balanced growth across our four billion-dollar lifestyle brands,” said Sonia Syngal, CEO, Gap Inc. in a statement.

Net sales and comparable sales at Gap Inc’s global brands

The company’s online sales grew 44 percent compared to the fourth quarter of 2019 and represented 43 percent of the total business. Full year online sales grew 57 percent versus 2019 and represented 39 percent of total net sales.

Fourth quarter net sales at Old Navy were muted in part due to supply chain impacts, up 2 percent versus 2019 with comparable sales flat versus 2019. For the year, the brand crossed 9 billion dollars in net sales, up 14 percent compared to fiscal year 2019 with comparable sales up 12 percent versus 2019.

Gap brand fourth quarter net sales declined 13 percent versus 2019, with permanent store closures contributing an estimated 17 percentage points of decline. Global comparable sales increased 3 percent with North America comparable sales up 12 percent versus the fourth quarter of 2019. Fiscal year 2021 net sales were down 12 percent compared to fiscal year 2019, with permanent store closures reducing sales by an estimated 15 percentage points. Global comparable sales for the year were up 2 percent with North America comparable sales up 12 percent versus 2019.

Banana Republic reported fourth quarter net sales decline of 11 percent versus 2019, with permanent store closures contributing an estimated 10 percentage points of the decline. Comparable sales were down 2 percent versus the fourth quarter of 2019. Fiscal year 2021 net sales were down 18 percent compared to fiscal year 2019, with permanent store closures reducing sales by an estimated 10 percentage points. Comparable sales for the year were down 9 percent versus 2019.

Athleta brand net sales were up 52 percent for the fourth quarter versus 2019 with comparable sales up 42 percent. Fiscal year 2021 net sales were up 48 percent compared to fiscal year 2019 with comparable sales up 39 percent versus 2019. The company said, Athleta is on track to hit 2 billion dollars in net sales by fiscal year 2023.

The company paid a dividend of 12 cents per share during the fourth quarter of fiscal year 2021. In fiscal year 2021, the company paid dividends totaling 226 million dollars and on February 24, 2022, the company’s board of directors authorized a first quarter dividend of 15 cents per share, an increase of 25 percent versus the fourth quarter fiscal 2021 dividend.

The company ended the fiscal year with 3,399 store locations in over 40 countries, of which 2,835 were company operated.

Gap reveals fiscal year 2022 outlook

For fiscal year 2022, the company expects its reported diluted earnings per share to be in the range of 1.95 dollars to 2.15 dollars and adjusted diluted earnings per share to be in the range of 1.85 dollars to 2.05 dollars.

The company expects fiscal year 2022 revenue growth to be in the low single-digit range versus fiscal year 2021 with first quarter net sales expected to be down mid to high-single digits versus the first quarter of 2021.

Gap expects to deliver an operating margin of 6.3 percent to 6.8 percent on a reported basis and 6 percent to 6.5 percent on an adjusted basis in fiscal year 2022.

The company expects to open about 30 to 40 stores each for Old Navy and Athleta in fiscal year 2022. In addition, as part of its 350-store closure plan, the company expects to close about 50 to 60 Gap and Banana Republic stores in North America during the year.