Business
Gap impresses again: Fashion trend hits the mark
New leadership at clothing retailer sparks optimism across all brands – Profitability remains intact.
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Gap Inc. experienced a remarkable sales increase in the last quarter under new creative leadership. Sales rose by 3% compared to the previous year, significantly higher than the 1.2% expected by Wall Street.
Particularly impressive is that all of the company's brands - Gap, Old Navy, Athleta, and Banana Republic - registered growth in comparable store sales. This was especially surprising for Athleta and Banana Republic, where analysts had expected declines. It has been over a decade since there was a quarter in which all four brands simultaneously recorded sales growth.
The net profit amounted to 158 million US dollars, 267% above analysts' expectations. As a result, Gap raised its forecast for the entire fiscal year and now expects a slight increase in net sales, excluding the additional week in fiscal year 2023. The company now forecasts an operating profit growth of at least 40%, significantly above the previous estimate of 10 to 15%.
Here is the translated heading in English:
"After the announcement of the results, Gap's shares rose by 20% in after-hours trading. The company's stock had already gained value previously, after Richard Dickson was appointed CEO last year and recently with the addition of designer Zac Posen as Creative Director. These decisions marked a turning point after a series of less creative leaders. Despite these developments, Gap's shares traded at lower multiples of expected revenue compared to smaller competitors like Abercrombie & Fitch and Urban Outfitters. This potentially reflected some caution from investors who wanted further evidence of a turnaround."
The last quarter provided this evidence. It marked the third full quarter with Dickson at the helm, during which sales trends across all brands steadily improved. The Gap brand benefited from creative campaigns like the "Linen Moves" campaign, where dancers showcased linen clothing. Sales of linen clothing increased double digits in the last quarter compared to the previous year. At Old Navy, consumers responded positively to trend-oriented products, while Banana Republic scored with classic pieces, and Athleta impressed with product innovations.
Despite the fashion focus, Gap has not neglected financial discipline.