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Gap's (GPS) Q1 Earnings and Sales Beat Estimates, Rise Y/Y
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Gap Inc. (GPS - Free Report) reported first-quarter fiscal 2024 results, wherein the bottom and top lines surpassed the Zacks Consensus Estimate and grew year over year. GPS posted adjusted earnings of 41 cents per share, which surpassed the Zacks Consensus Estimate of 14 cents. The company had reported a loss of 5 cents a share in first-quarter fiscal 2023.
Net sales inched up 3% year over year to $3,388 million and beat the consensus estimate of $3,282 million. Comparable sales (comps) rose 3% year over year.
Online sales grew 5% year over year, accounting for 38% of the total sales. Store sales rose 3% year over year.
Impressively, shares of this Zacks Rank #2 (Buy) company have gained 23.4% in after-hours trading on May 30, following the robust quarterly results and raised outlook for the fiscal year. Over the past three months, the stock has risen 15.4%, outperforming the industry’s 4.9% rise.
Brand-Wise Sales & Comps
Old Navy: Net sales at Old Navy Global increased 5% year over year to $1.9 billion. Comps also rose 3%, marking the third consecutive quarter of growth. Sales for Old Navy Global beat our model’s estimate of $1.8 billion.
Gap Global: Net sales remained flat year over year at $689 million due to solid marketing and product execution around the Linen Moves campaign. Comps increased 3%. Sales for Gap Global lagged our model’s estimate of $691.6 million.
Banana Republic: Net sales increased 2% year over year to $440 million whereas comps rose 1%. Sales surpassed our estimate of $418 million.
Athleta: Net sales rose 2% year over year to $329 million whereas comps grew 5%. Net sales beat our estimate of $321.5 million.
Margins & Costs
The gross margin of 41.2% expanded 400 basis points (bps) from the prior-year period’s reported figure. Meanwhile, we estimated the adjusted gross margin to be 38.2%. The merchandise margin grew 330 bps, benefiting from lower commodity costs. Rent, occupancy and depreciation, as a rate of sales, leveraged 70 bps year over year.
Other Financials
Gap ended the fiscal first quarter with cash and cash equivalents of $1.5 billion, up 25% from the year-ago period. As of May 4, it had total stockholders’ equity of $2.7 billion and a long-term debt of $1.5 billion.
As of May 4, the company generated $30 million in cash from operating activities. It paid cash dividends of $56 million in the fiscal first quarter. The company’s board has approved a dividend of 15 cents per share for the fiscal second quarter. Capital expenditure was $93 million. For fiscal 2024, capital expenditure is expected to be $500 million.
As of the aforementioned date, Gap had 3,571 stores in more than 40 countries, of which 2,554 were company-operated.
Guidance
Management provided second-quarter and fiscal 2024 outlook. For the second quarter, it projects net sales growth in low-single digits year over year. The company expects gross margin expansion of at least 300 bps and operating expenses to increase about 5% from $1.214 billion in the year-ago quarter.
For fiscal 2024, it projects sales to grow slightly year over year on a 52-week basis compared with flat sales predicted earlier. The company expects gross margin expansion of at least 150 bps and operating income to grow in the mid-40% range. Operating expenses are still forecast to be around $5.1 billion and the effective tax rate is estimated to be 28%. Earlier, the company had anticipated gross margin expansion of at least 50 bps and operating income to grow in the low to mid-teens.
Abercrombie, a leading apparel retailer, currently sports a Zacks Rank #1 (Strong Buy). ANF delivered an earnings surprise of 210.3% in the trailing four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Abercrombie’s financial-year sales suggests growth of 1.7% from the year-ago reported figure.
American Eagle, a casual apparel retailer, currently carries a Zacks Rank of 2. AEO delivered an earnings surprise of 22% in the last reported quarter.
The consensus estimate for American Eagle’s current financial-year sales suggests growth of 3.4% from the year-ago reported figure.
Deckers, a footwear and accessories dealer, currently carries a Zacks Rank of 2. DECK delivered an earnings surprise of 32.1% in the trailing four quarters.
The Zacks Consensus Estimate for Deckers’ current financial-year sales suggests growth of 15.8% from the year-ago reported figure.
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Gap's (GPS) Q1 Earnings and Sales Beat Estimates, Rise Y/Y
Gap Inc. (GPS - Free Report) reported first-quarter fiscal 2024 results, wherein the bottom and top lines surpassed the Zacks Consensus Estimate and grew year over year. GPS posted adjusted earnings of 41 cents per share, which surpassed the Zacks Consensus Estimate of 14 cents. The company had reported a loss of 5 cents a share in first-quarter fiscal 2023.
Net sales inched up 3% year over year to $3,388 million and beat the consensus estimate of $3,282 million. Comparable sales (comps) rose 3% year over year.
Online sales grew 5% year over year, accounting for 38% of the total sales. Store sales rose 3% year over year.
The Gap, Inc. Price, Consensus and EPS Surprise
The Gap, Inc. price-consensus-eps-surprise-chart | The Gap, Inc. Quote
Impressively, shares of this Zacks Rank #2 (Buy) company have gained 23.4% in after-hours trading on May 30, following the robust quarterly results and raised outlook for the fiscal year. Over the past three months, the stock has risen 15.4%, outperforming the industry’s 4.9% rise.
Brand-Wise Sales & Comps
Old Navy: Net sales at Old Navy Global increased 5% year over year to $1.9 billion. Comps also rose 3%, marking the third consecutive quarter of growth. Sales for Old Navy Global beat our model’s estimate of $1.8 billion.
Gap Global: Net sales remained flat year over year at $689 million due to solid marketing and product execution around the Linen Moves campaign. Comps increased 3%. Sales for Gap Global lagged our model’s estimate of $691.6 million.
Banana Republic: Net sales increased 2% year over year to $440 million whereas comps rose 1%. Sales surpassed our estimate of $418 million.
Athleta: Net sales rose 2% year over year to $329 million whereas comps grew 5%. Net sales beat our estimate of $321.5 million.
Margins & Costs
The gross margin of 41.2% expanded 400 basis points (bps) from the prior-year period’s reported figure. Meanwhile, we estimated the adjusted gross margin to be 38.2%. The merchandise margin grew 330 bps, benefiting from lower commodity costs. Rent, occupancy and depreciation, as a rate of sales, leveraged 70 bps year over year.
Other Financials
Gap ended the fiscal first quarter with cash and cash equivalents of $1.5 billion, up 25% from the year-ago period. As of May 4, it had total stockholders’ equity of $2.7 billion and a long-term debt of $1.5 billion.
As of May 4, the company generated $30 million in cash from operating activities. It paid cash dividends of $56 million in the fiscal first quarter. The company’s board has approved a dividend of 15 cents per share for the fiscal second quarter. Capital expenditure was $93 million. For fiscal 2024, capital expenditure is expected to be $500 million.
As of the aforementioned date, Gap had 3,571 stores in more than 40 countries, of which 2,554 were company-operated.
Guidance
Management provided second-quarter and fiscal 2024 outlook. For the second quarter, it projects net sales growth in low-single digits year over year. The company expects gross margin expansion of at least 300 bps and operating expenses to increase about 5% from $1.214 billion in the year-ago quarter.
For fiscal 2024, it projects sales to grow slightly year over year on a 52-week basis compared with flat sales predicted earlier. The company expects gross margin expansion of at least 150 bps and operating income to grow in the mid-40% range. Operating expenses are still forecast to be around $5.1 billion and the effective tax rate is estimated to be 28%. Earlier, the company had anticipated gross margin expansion of at least 50 bps and operating income to grow in the low to mid-teens.
Other Key Picks
We have highlighted three other top-ranked stocks, namely Abercrombie (ANF - Free Report) , American Eagle (AEO - Free Report) and Deckers (DECK - Free Report) .
Abercrombie, a leading apparel retailer, currently sports a Zacks Rank #1 (Strong Buy). ANF delivered an earnings surprise of 210.3% in the trailing four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Abercrombie’s financial-year sales suggests growth of 1.7% from the year-ago reported figure.
American Eagle, a casual apparel retailer, currently carries a Zacks Rank of 2. AEO delivered an earnings surprise of 22% in the last reported quarter.
The consensus estimate for American Eagle’s current financial-year sales suggests growth of 3.4% from the year-ago reported figure.
Deckers, a footwear and accessories dealer, currently carries a Zacks Rank of 2. DECK delivered an earnings surprise of 32.1% in the trailing four quarters.
The Zacks Consensus Estimate for Deckers’ current financial-year sales suggests growth of 15.8% from the year-ago reported figure.