Gap Inc (NYSE:GPS) shares fell more than 16% on Thursday after the apparel retailer issued a weaker-than-expected second-quarter sales outlook and trimmed its full-year revenue forecast, despite a broadly solid first-quarter performance and continued strength in its flagship Gap brand.
The company reported first-quarter revenue of $3.5 billion, up 1% year over year but slightly below analyst estimates of $3.53 billion.
Comparable sales rose 2%, missing the 3.1% consensus estimate, though gross margin of 40.5% exceeded the company’s own outlook.
Adjusted earnings per share of $0.38 came in just ahead of the $0.37 estimate.
The sharp share decline was driven largely by second-quarter guidance calling for net sales to be flat to down 1% year over year, well below analyst expectations of a 2.1% gain. For the full year, Gap lowered its net sales growth forecast to 1% to 2%, from a prior outlook of 2% to 3%, while raising its adjusted EPS guidance to $2.30 to $2.40.
Performance varied sharply across the company’s four brands. The Gap brand posted a 10% comparable sales gain, its tenth consecutive positive quarter, driven by strength in denim and fleece. Banana Republic rose 2% and Old Navy gained just 1%, hurt by weakness in seasonal categories including dresses. Athleta fell 11% as its turnaround effort continued to lag expectations.
Jefferies maintained a constructive long-term view, citing margin discipline and brand reinvigoration under CEO Richard Dickson, while lowering its price target to $29. The bank flagged early investments in beauty and artificial intelligence as potential longer-term growth drivers, but cautioned that tariffs and fuel costs remain near-term headwinds.
Gap ended the quarter with $2.6 billion in cash and short-term investments and returned $464 million to shareholders. The company said it expects second-half improvement as Old Navy’s seasonal challenges ease and core categories hold steady.
Disclaimer : This story is auto aggregated by a computer programme and has not been created or edited by DOWNTHENEWS. Publisher: finance.yahoo.com
