The Gap Inc. Earnings: Margins Shrink as Net Income Drops
S&P 500 (NYSE:SPY) component The Gap, Inc. (NYSE:GPS) reported its results for the first quarter. The Gap Inc., is an international specialty retailer that sells casual apparel, accessories and personal care products for men, women, and children.
The Gap Earnings Cheat Sheet for the First Quarter
Results: Net income for The Gap, Inc. fell to $233 million (40 cents/share) vs. $302 million (45 cents/share) a year earlier. A decline of 22.8% from the year earlier quarter.
Revenue: Fell 1% to $3.29 billion YoY.
Actual vs. Wall St. Expectations: GPS beat the mean analyst estimate of 39 cents/share. Estimates ranged from 38 cents per share to 40 cents per share. Analysts were expecting revenue of $3.29 billion.
Quoting Management: “While we acknowledge that costing pressure is impacting our business, we’re working hard to navigate this short-term macro challenge to our profitability in the current fiscal year,” said Glenn Murphy, chairman and chief executive officer of Gap Inc. “That said, our strategy remains the same – to deliver consistent, steady growth in North America while investing in our long-term global initiatives, especially in online and international.”
A year-over-year revenue decrease last quarter snaps a streak of four consecutive quarters of revenue increases. The best quarter in that span was the first quarter of the last fiscal year, which saw revenue rise 6.5%.
Gross margin shrunk 2.5 percentage points to 39.6%. The contraction appeared to be driven by rising costs as the figure rose 3.3% from the year earlier quarter while revenue fell 1%.
The company has now beaten estimates the last two quarters. In fourth quarter of the last fiscal year, it topped expectations with net income of 60 cents versus a mean estimate of net income of 56 cents per share.
Net income has increased 4.5% year over year on average across the last five quarters. The biggest gain came in the first quarter of the last fiscal year, when income climbed 40.5% from the year earlier quarter.
Competitors to Watch: Urban Outfitters, Inc. (NASDAQ:URBN), Abercrombie & Fitch Co. (NYSE:ANF), The Gymboree Corporation (GYMB), The Buckle, Inc. (NYSE:BKE), American Eagle Outfitters (NYSE:AEO), J. Crew Group, Inc. (NYSE:JCG), Aeropostale, Inc. (NYSE:ARO), Children’s Place Retail Stores, Inc. (NASDAQ:PLCE), The Walking Co. Hldgs., Inc. (WALK), and The Wet Seal, Inc. (NASDAQ:WTSLA).
Stock Performance: Shares of GPS are down 13% from the previous close.