Gap reports a 43% decline in sales as Coronavirus shuts stores in the first quarter

Gap Inc. (NYSE: GPS) released its quarterly financial results on Thursday that posted a 43% decline in sales. The company attributed its downbeat performance to the Coronavirus pandemic that closed its nationwide retail stores in the quarter that ended on 2^nd May. Moody’s Analytics downgraded Gap’s stock to junk in late March.

Shares of the company were reported about 5% down in extended trading on Thursday. At £9.05 per share, Gap is roughly 35% down year to date in the stock market after recovering from £4.34 per share in the first week of April. Learn more about how to choose winning stocks.

Gap’s Q1 financial results versus analysts’ estimates

According to Refinitiv, analysts had anticipated the company to print £1.81 billion in revenue in the first quarter. Their estimate for loss per share was capped at 52.86. In its report on Thursday, Gap fell short of both estimates posting a lower £1.66 billion in Q1 revenue and a higher £1.98 of loss per share.  

The retail company’s sales were 50% down at its namesake brand, 42% down at Old Navy, 47% down at the Banana Republic, and 8% down at Athleta, on a year over year basis.

In terms of digital sales, CEO Sonia Syngal reported an over 100% increase in May. On a year over year basis, e-commerce sales saw a 13% increase in Q1. Gap generated £2.93 billion worth of sales in the comparable quarter of last year. The San Francisco-headquartered company didn’t announce its same-store sales in the first quarter.

Gap attributes its net loss to impairment charge and write-down

As of Thursday, Syngal added, more than 1,500 of Gap’s retail stores in North America have resumed operations. Sales at the reopened stores, the CEO further highlighted, are averaging at around 70% of the pre-virus levels. Much of the recovery was attributed to the company’s Old Navy brand.   

At £735.35 million, Gap’s net loss came in significantly higher in Q1 as compared to £179.10 million profit that it recorded in the same quarter last year. The U.S. retailer attributed its net loss to £185.42 million of inventory impairment charge and £381.88 million write-down in the recent quarter.

Gap said that it concluded the first quarter with a merchandise inventory worth £1.74 billion that marks a 1% year over year decline. Its short-term investments, and cash and equivalents were valued at £870 million at the end of Q1.

Owing to the rising Coronavirus uncertainty, Gap did not provide financial guidance for the full fiscal year. The £3.57 billion company currently has a price to earnings ratio of 12.04.