The US clothing group Gap Inc. ended the second quarter of the 2022/23 financial year in the red. The loss is due to negative special effects, the company explained in an interim report published on Thursday evening. Although the group, which owns the Old Navy, Gap, Banana Republic and Athleta brands, also reported a sharp drop in sales, recent results beat market expectations.
For the 13 weeks ended July 30, group sales were $3.86 billion. It was eight percent below the level of the same quarter of the previous year. The highest-revenue brand, Old Navy, once again suffered the greatest losses. Their revenues fell by 13 percent to 2.1 billion US dollars. In addition to the “falling demand from customers with lower incomes”, the company also blamed errors in assortment planning and “acceptance problems in some key categories” for the decline.
Weaker demand weighs on the Old Navy and Gap brands
The Gap label also went down, with a 10 percent drop in sales to $881 million. On the other hand, the brands Banana Republic, which managed an increase of nine percent to 539 million US dollars, and Athleta, whose sales rose by one percent to 344 million US dollars, were able to increase.
Higher freight and product costs as well as extensive price reductions, which had to be applied in particular at Old Navy, squeezed the margins. In addition, inventory write-downs of $58 million and one-time charges related to the restructuring of the Old Navy business in Mexico impacted earnings. The group had to post an operating loss of 28 million US dollars after an operating profit of 409 million US dollars had been achieved in the same quarter of the previous year. Reported net loss was also US$49 million (€49 million). In the second quarter of 2021/22, the apparel retailer had posted a surplus of $258 million. Adjusted for special effects, net income was US$30 million after reaching US$272 million in the same period last year.
For the entire first half of the year, consolidated sales were $7.33 billion. It was eleven percent down on the previous year’s level. The bottom line was a net loss of $211 million. In the first six months of the previous year, Gap had posted a profit of $424 million.