Gap Inc. Reports Mixed Q4 Amidst Winter Storm Disruptions
Gap Inc. reported mixed fiscal fourth-quarter results, falling short of earnings expectations but meeting revenue forecasts. The retailer's performance was significantly affected by historic winter storms in January, which led to approximately 800 temporary store closures at their peak across its brands, including Old Navy, Banana Republic, Athleta, and the namesake Gap banner.
Gap's Chief Financial Officer, Katrina O'Connell, noted that "trends for Old Navy and other brands were improving before the weather disruptions and recovered immediately after the storms subsided."
Financial Performance Overview
- Earnings Per Share (EPS): 45 cents reported versus 46 cents expected.
- Revenue: $4.24 billion reported, meeting the $4.24 billion expected, representing a 2% increase from $4.15 billion a year prior.
- Net Income: $171 million (45 cents per share), down from $206 million (54 cents per share) in the same period last year.
- Gross Margin: Fell to 38.1%, slightly below analyst expectations, partly due to tariffs.
Following the announcement, Gap's stock experienced a decline of up to 9% in extended trading.
Outlook and Strategic Focus
Gap's guidance for the current quarter predicts a revenue increase of 1% to 2%, slightly below the 2% consensus. For the full year, the company anticipates sales growth between 2% and 3%, aligning with the 2.5% expectation. Adjusted full-year earnings per share are projected to be between $2.20 and $2.35, considering a $313 million legal settlement.
The company's outlook does not incorporate recent tariff changes, which CFO O'Connell stated is "premature to plan for a change." She indicated that if the new 15% Section 122 tariffs remain or expire in July, it could potentially offer a modest benefit to operating income, as this rate is slightly below previous IEEPA rates.
CEO Richard Dickson highlighted the next phase of his turnaround plan, focusing on "building momentum" by growing the core apparel business through continuous improvement in product, marketing, and storytelling. Gap is also exploring growth opportunities in beauty and accessories and developing its fashion and entertainment platform.