Gap's turnaround plan boosts Q1 performance, raises outlook

First quarter net sales of 3.4 billion dollars at Gap were up 3 percent with comparable sales up 3 percent year-over-year. Store sales for the quarter increased 3 percent and online sales increased 5 percent.

As a result of its strong first quarter results, the company is increasing its outlook for fiscal 2024, reflecting higher net sales and meaningfully higher operating income growth compared to its prior expectations

"Gap Inc. delivered a strong quarter that exceeded expectations across key metrics. Our first quarter results are giving us confidence to raise both sales and operating income guidance for the full year," said Gap Inc. president and CEO, Richard Dickson in a statement.

Highlights of Gap’s Q1 results

The company’s gross margin of 41.2 percent increased 410 basis points versus last year and increased 400 basis points versus last year's adjusted gross margin. Operating income was 205 million dollars; and operating margin was 6.1 percent.

The company reported net income of 158 million dollars and diluted earnings per share of 41 cents.

The company ended the quarter with 3,571 store locations in over 40 countries, of which 2,554 were company operated.

Gap Inc Q1 performance across brand portfolio

Old Navy net sales of 1.9 billion dollars were up 5 percent in the first quarter with comparable sales up 3 percent.

Gap brand net sales of 689 million dollars were flat compared to last year and comparable sales were up 3 percent.

First quarter net sales at Banana Republic of 440 million dollars were up 2 percent compared to last year and comparable sales were up 1 percent.

Athleta brand net sales of 329 million dollars, increased 2 percent and comparable sales rose 5 percent driven by positive customer response well to the new product, brand expression, and activations. The company expects net sales in the second quarter to be challenged as the brand laps last year's quarter of heavy discounting.

Raising its net sales and operating income outlook for the year ahead, the company said it expects FY24 net sales to be up slightly and operating income in the mid 40 percent growth range and gross margin expansion of at least 150 bps.

For the second quarter, net sales are forecasted to achieve low-single-digit growth, and gross margin expansion of approximately 300 bps.