Gap’s Surprise Earnings Release Shows Strong Second Quarter



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Gap Inc. beat sales expectations in the second quarter, suggesting that an overhaul by new chief executive officer Richard Dickson is working.

Net sales in the period ended Aug. 3 rose 5 percent from a year ago, to $3.7 billion. Comparable sales, which Gap defines as stores open for at least a year, were up 3 percent across its portfolio of brands, which includes Old Navy and Athleta.

The company raised its gross margin and operating income guidance for the full year, citing the strong second quarter results.

Gap’s results were posted on its investor relations website hours ahead of schedule. The company had planned to report at 4:15 p.m. New York time, but a press release and presentation appeared on its website just before 9:15 a.m. The company officially released the results about two hours later.

The early release of the earnings results was due to an administrative error, a Gap spokesperson said.

The retailer’s shares rose 3 percent at 3:19 p.m. after trading was temporarily halted earlier in the day. The stock had gained 7.3 percent this year as of Wednesday’s close.

Specialty retailers including TJX Cos. and Abercrombie & Fitch Co. have warned of a more cautious consumer and slowed spending in the second half of the year, but Gap is bucking the trend. The company has not seen “any significant difference in consumer patterns” and actually saw growth across all income cohorts, Dickson told Bloomberg News in an interview.

Gap shook up the company a year ago when it named Dickson CEO after he was credited with reviving toymaker Mattel Inc. and its Barbie brand. During his tenure, the retailer has leaned on celebrity marketing and revamped the executive ranks.

Comparable sales at Old Navy — by far Gap’s biggest brand — rose faster than Wall Street’s expectations in the second quarter. The namesake Gap chain continued to gain market share but its sales growth was less than analysts had projected.

Progress at Banana Republic and Athleta has been slower. Banana Republic’s comparable sales were flat, coming in below analysts’ estimates for a 1.6 percent gain, while Athleta’s sales fell 4 percent in line with expectations. The company said it expects Athleta to return to sales growth for the remainder of the year.

By Lily Meier

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