Specialty apparel retailer Gap Inc. (NYSE: GPS) reported lower earnings and revenues for the third quarter of 2019, owing mainly to a decline in comparable-store sales. The results, however, topped the Street view, sending the company’s stock higher during Thursday’s aftermarket trading session.
Total comparable store sales decreased by 4% annually. Old Navy Global, which accounts for about 50% of total sales, registered a 4% decline in comp-sales. Sales at Gap Global and Banana Republic dropped 7% and 3%, respectively. At $4 billion, third-quarter net sales were down 2% year-over-year, mainly due to unfavorable foreign exchange rates. However, the top-line surpassed analysts’ prediction.
Adjusted earnings came in at $0.53 per share during the three-month period, down from the year-ago level. Net income was $140 million or $0.37 per share, down from $266 million or $0.69 per share in the same period of last year. Analysts were looking for a faster decline.
At the end of October, merchandise inventory stood at $2.72 billion, up 2% year-over-year. During the quarter, Gap repurchased 2.9 million shares for $50 million and paid a dividend of $0.2425 per share.
“We are not pleased with the third-quarter results and are focused on aggressively addressing the operational issues that are hindering the performance of our brands. We continue to make progress against our separation plans, which will provide improved focus and a further catalyst for transformation,” said interim CEO Robert Fisher.
For the full fiscal year, the management continues to expect unadjusted earnings to be in the range of $1.38 per share to $1.47 per share and adjusted earnings between $1.70 per share and $1.75 per share. Full-year comparable store sale is expected to be down mid-single digits, while net sales are forecast to be down low-single digits.
Shares of Gap dropped 39% in 2019, losing steadily since the beginning of the year. Analysts’ consensus rating on the stock is hold, with an average price target of $17.53. The stock gained about 4% Thursday evening following the earnings report.
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