(AOF) – Gap shares jumped nearly 30% to $17.73; better-than-expected quarterly results from the American clothing retailer accompanied by encouraging signs about the group’s recovery efforts. Its main brand Old Navy recorded growth of 1% like-for-like in the third quarter. The Bernstein research firm points out that Old Navy had not posted a positive performance for around 2 years. He adds that the group’s outperformance is general: revenues, gross margin, operating profit, etc.
In the third quarter, ended at the end of October, Gap generated net income of $218 million, or 58 cents per share, compared to $282 million and 77 cents, respectively, a year earlier. Adjusted earnings per share came to 59 cents, almost three times higher than the market consensus, after 71 cents a year earlier.
Gross margin, a measure of profitability closely followed by analysts, increased by 3.9 points to 41.3%. Gap benefited from lower raw material and freight costs.
Quarterly consolidated revenues rose to $3.77 billion from $4.04 billion, beating consensus by 4%. They are down 2% on a comparable basis. In detail, Old Navy showed growth of 1% while Gap recorded a decline of 1%, Banana Republic of 8% and Athleta of 19%.
The American clothing retailer, however, anticipates stable or slightly negative sales for the current quarter, including the end-of-year holidays.
The clothing distributor is facing a difficult economic environment and strong competition from online players, such as the Chinese Shein, which offers very cheap products.
The group confirms that its sales for the 2023 financial year should fall by around 5% compared to 15.6 billion last year. Gap, however, expects an expansion in annual gross margin.
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