Old Navy Leads the Turnaround as Gap Inc. Posts Solid Financial Results
Gap Inc. continues to show signs of recovery, reporting significant improvements in its second-quarter financial performance for the period ending August 3. The company posted a notable increase in both sales and net income, driven primarily by strong results from its Old Navy brand.
Gap Inc. reported net income of $206 million, translating to diluted earnings per share of 54 cents, a significant rise from $116 million, or 32 cents per share, in the same period last year. Net sales reached $3.7 billion, reflecting a 5 percent increase year-over-year, with comparable sales up 3 percent. The company also improved its gross margin outlook for fiscal 2024, now expecting an expansion of approximately 200 basis points compared to its previous forecast of at least 150 basis points.
Old Navy emerged as the standout performer, with second-quarter net sales of $2.1 billion, up 8 percent from last year, and a 5 percent rise in comparable sales. This marks the fourth consecutive quarter of positive comparable sales for the brand, which the company attributed to a focus on operational discipline and consistent performance.
The Gap brand also showed progress, with second-quarter net sales of $766 million, up 1 percent from the previous year, and a 3 percent increase in comparable sales. The company noted that Gap’s ongoing reinvigoration efforts have contributed to market share gains over the past five quarters.
Banana Republic reported flat results, with second-quarter net sales of $479 million and no change in comparable sales. The company acknowledged the brand’s focus on improving pricing and assortment but noted that challenges remain.
Athleta, however, faced a decline, with second-quarter net sales down 1 percent to $338 million and comparable sales down 4 percent. Despite this, Gap Inc. expressed optimism that Athleta will return to positive comparable sales growth for the remainder of the year.
In terms of overall store performance, sales increased by 4 percent year-over-year. Gap Inc. ended the quarter with 3,568 store locations across approximately 40 countries, of which 2,541 are company-operated. Online sales also saw growth, rising 7 percent and accounting for 33 percent of total net sales.
Gross margin improved significantly, reaching 42.6 percent, up 500 basis points from the previous year.
Richard Dickson, president and chief executive officer of Gap Inc., stated, “Gap Inc. delivered another successful quarter, exceeding financial expectations and gaining market share for the sixth consecutive quarter. In comparison to where we were only one year ago, we are in a stronger position across key metrics that matter — including net sales, margins, and our cash position — and we are making consistent progress in the reinvigoration of our brands. These results are a reflection of the dedication and collaboration of our global team, reinforcing my confidence that we are well on our way to unlocking the full potential of this extraordinary portfolio of iconic American brands.”