Gap’s net sales come in 18% lower in Q2 due to COVID-19 restrictions

Written by: Wajeeh Khan
August 28, 2020
  • Gap’s net sales come in 18% lower in Q2 due to COVID-19 restrictions.
  • The retailer says its digital sales were up 95% in the recent quarter.
  • The American company swung to £46.97 of loss in the second quarter.

In a report on Thursday, Gap Inc. (NYSE: GPS) revealed an 18% year over year decline in sales in the fiscal second quarter. The company said that its digital sales were up 95% in the recent quarter. But store sales tanked 48% due to COVID-19 restrictions. In a bid to shore up finances, Gap is likely to close many of its countrywide stores.

Shares of the company tanked roughly 1.5% in extended trading on Thursday. Including the price action, Gap is now trading around the same level at which it started the year 2020. Its performance in the stock market last year was reported fairly downbeat with an annual decline of about 30%. At the time of writing, the San-Francisco based company has a market capitalisation of £4.92 billion.

Gap’s Q2 financial results versus analysts’ estimates

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According to Refinitiv, experts had forecast the company to print £2.20 billion in revenue in the second quarter. In terms of loss per share, they had estimated 31.06 pence. In its report on Thursday, Gap topped both estimates posting a higher £2.48 billion in revenue and a lower 12.88 pence of loss per share in Q2.

The U.S. retailer swung to £46.97 of loss in the recent quarter versus £127.28 million of net income in the same quarter last year. Its sales in the year-ago quarter were recorded at £3.03 billion. Gap’s online sales in Q2 made up 50% of its net quarterly sales.

As per the clothing and accessories company, its digital customer base expanded by 3.5 million in the second quarter. Same-store sales, it added, came in 13% higher on an annualised basis. Gap generated £98.50 million in revenue from face masks in the recent quarter.

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Other prominent figures in Gap’s earnings report

Other prominent figures in Gap’s earnings report on Thursday include a 5% decline in sales at its Old Navy brand. Sales were down 36% at Old Navy stores in Q2 but surged 136% online. At its namesake Gap brand, on the other hand, overall sales came in 28% lower after a 55% decline in sales from stores and a 75% increase online.

Lastly, its Banana Republic brand registered a 52% decline in sales after its store sales slid 71%, but online sales jumped 26%. In its Q1 report published in June, Gap had revealed a 43% decline in sales due to COVID-19 restrictions.

Gap had £1.67 billion in cash and investment securities on its balance sheet as of the end of the second quarter. The retailer refrained from giving its guidance for the full year due to the Coronavirus uncertainty.