Gap tumbles after sales decline worsens at namesake brand

People pass by the GAP clothing retail store in Manhattan, New York, US. (Reuters pic)

NEW YORK: Old Navy has been Gap Inc.’s saviour in recent quarters, but its strength isn’t enough to quell investors’ concerns about its namesake brand.

Gap stores posted same-store sales that fell 5% last quarter — more than double the decline projected by analysts. While ongoing gains at the Old Navy value chain helped shore up results, the shares still dropped in late trading Thursday.

Gap has increasingly relied on Old Navy and its Athleta brand while it works to revive its namesake unit. In June the company named Neil Fiske as chief executive officer of the Gap brand, and his priority has been to fix problems with late deliveries that caused inventory to swell in the first quarter. That forced the retailer to resort to discounts.

Gap shares fell as much as 9.2% to US$29.44 in after-hours trading. The stock had already dropped 4.8% this year through Thursday’s close.

Comparable-store sales at the Gap brand were seen falling 2.3%, according to Consensus Metrix. The company has been unable to turn the unit around, with that measure falling in 16 of the past 18 quarters.

At Old Navy, comparable sales rose 5%, compared with an estimate of a 4% gain. Banana Republic same-store sales of 2% were in line with projections. By measuring results at established stores, comparable sales are a key gauge of a retailer’s health.