Gap's Dismal Earnings Picture

Results for Gap Inc. have been a mixed bag for the last several years. The brand has always managed to have at least one of its three stores doing well. Recently it's been Old Navy.

As this week's Q1 earnings indicate, that is just not the case anymore — as all three of its brands reported anemic sales.

Overall, Gap reported a same-store sale drop of 5 percent — an increase from the 4-percent decrease on offer a year ago. Broken out by individual store, Gap saw its sales drop 3 percent, which is actually a big improvement over the 10 percent it fell off last year and Banana Republic continued its trip around the drain with an 11 percent sales drop (up from 8 percent last year). But the biggest upset in the figures were in Old Navy's decline sales — down 6 percent, after a 3-percent increase last year.

The April picture alone shows improvement over last year — a 7-percent drop in same-store sales instead of 2015's 12 percent decrease — but when one is victorious in how little has been lost, improvement is obviously still needed.

"This has been a disastrous quarter for Gap and one during which all of its main engines stalled and went into reverse," Neil Saunders, CEO of research firm Conlumino, told Reuters. "While the [Old Navy] brand has been the star of the show for many quarters, the past few collections have been dull and uninspiring.”

Other analysts have noted concerns that Gap's turnaround efforts thus far are insufficient - and that the retail still needs to close over 100 stores to properly streamline operations.

Which, according to remarks from company representatives, is exactly what Gap intends to do, with an eye toward improving efficiency and flexibility.

“Our industry is evolving and we must transform at a faster pace, while focusing our energy on what matters most to our customers," Gap CEO Art Peck said in a statement. "We are committed to better positioning the business to recapture market share in North America and to capitalizing on strategic international regions where there is a strong runway for growth.”



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