Gap Inc forecast a full-year profit below analysts’ estimates as the apparel retailer struggles to attract shoppers to its Banana Republic stores. By division, Gap stores suffered a 3 percent decline in revenue, Banana Republic had a 9 percent drop, and lower-priced Old Navy was flat.
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“Customers are confused and, of course, increasingly unwilling to pay the premium that Banana once commanded”.
The California-based company now expects adjusted earnings per share of $1.87-$1.92 for this year, down from its previous guidance of $2.20 to $2.25. The company had earlier forecast a profit of about US$1.92. The average estimate of 15 analysts surveyed by Zacks Investment Research was for earnings of 58 cents per share.
Gap has been in a cycle of discounting its goods to get shoppers to buy.
The company’s merchandise margins increased in the second quarter, Chief Financial Officer Sabrina Simmons said on a post-earnings conference call.
Gap offered a downbeat annual profit outlook late Thursday after reporting a 43 percent drop in net income for the second quarter, weighed down by moves to close stores. Gap shares were down just $0.18 (-0.70%) to $25.70 in after-hours trading.
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San Francisco-based Gap’s second-quarter profit plunged to $125 million or $0.31 per share from $219 million or $0.52 per share previous year. Revenue fell 1.2% from a year ago to $3.85 billion, also beating estimates for $3.78 billion. Up to Thursday’s close of US$25.88, the stock had lost almost a quarter of its value in the last 12 months.
