Hiatus still doesn’t see the light at the end of the tunnel. In the first quarter, the American fashion giant reduced its income by 6%, although it managed to improve the net result by reducing its losses to 18 million dollars.
The company, which closed the period on April 29 in the year 1300, ended 3,276 million dollars, the sale of business in China (which drew two percentage points) and the impact of the exchange (one percentage point).
On a like-for-like basis, sales fell 3%. When physical retail activity normalized, billing through the Internet channel fell by 9%, accounting for 37% of total revenue, while store sales fell by 4%.
The gap was the end of the partnership with Kanye West and the sale of the business in China
The gross margin, on the other hand, continues to improve and stands at 37.1%. Excluding $4 million in restructuring costs, adjusted gross margin improved by 420 basis points to 37.2%.
As a result, the gross performance gap widened to 1,214 million and the result was a negative net of 18 million dollars compared to 162 million of the previous year.
The drop in billing would have been much larger if not for Old Navy, the largest brand in the group, which contracted billing by only 1% to 1.8 billion dollars. However, the gap, the second largest by turnover, its income plummeted by 13%, up to 692 million dollars. Excluding the sale of Gap in China, the closure of the Yeezy line, the Kanye West brand, and the impact of exchange rates, the decrease was 1%.
Athlete and Gap led the brand’s decline in sales, with double-digit contractions
Excluding one-offs, the Athleta brand was penalized 11%, up to $321 million, due to “continued challenges in product acceptance.” The Banana Republic, for its part, went from a 24% growth last year to a 10% fall in the first quarter of this year, due to “changes in consumer preferences.”
Despite poor operating results, the gap continued to widen its balance sheet, reducing inventory by 27% and increasing cash and cash equivalents by 38%.
“We are continuing to take the necessary steps to drive change at Gap, with the ultimate goal of returning to a long-term consistent outcome,” said Bob Martin, interim executive chairman and CEO since Sonia Syngal’s departure last year.
The group has had an interim CEO for almost a year, following the departure of Sonia Syngal last year
“Although the economic context and consumer sentiment remain uncertain, the first round proves our ability to improve business, reduce inventory, increase operating margin and strengthen our balance sheet,” added the executive.
Mayo Shattuck, independent director, applauded Martin’s work and reiterated the company’s goal of establishing a new CEO “who brings passion, vision and focus to consumers.”
As of April 29, the group worked with a network of 3,453 branches in 40 countries, most of which, around 2,600, are its stores. Since the end of the financial year, Gap has closed 22 stores and closed 22.
The company plans to bring its sales down to single digits this year
to foresee
For the second quarter, the company anticipates a new contraction in sales, also impacted by sales in the Baozun business in China, which last year brought in about sixty million dollars in sales.
For the whole year, he maintains his forecast of a record decrease between 1% and 5%. This fiscal year will have more weeks, which will have a positive impact of 150 million dollars.
The gross margin will also continue to expand: at projected sales levels, expenses will be around $1.3 billion in the second quarter and around $5.2 billion in 2023.
Instead, the group reduced its forecast for the year, now investing between 500 million and 525 million dollars, compared to the previous range, which stood at 550 million. The adjustment is due to the reduction in investment projects, and the fact that fewer Old Class Doors and Athletes will be accepted in the end than expected.
Hiatus was born in 1969 as a store selling Levi’s jeans in San Francisco. In 1972, the company already had 25 stores and two years later it launched its first branded products. The group is today the largest fashion retailer in the United States and competes with Japan’s Fast Fast Retailing for fourth place worldwide.
