Gap’s shares dropped in pre-market trading after the
retailer reported a sales slump that extended into December that included even
Old Navy, once a bright spot for the company. The San Francisco-based clothing
retailer, which also operates stores under its own brand as well as Banana
Republic, said Thursday that a key sales measure fell 5% for the five-week
period ended Jan. 2. The decline was worse than the 3.5% drop analysts surveyed
by Thomson Reuters expected, on average.
By division, the key revenue measure at Gap fell 2%, while
Banana Republic posted a 9% drop. However, what’s more worrisome is that Old
Navy, which had been a juggernaut, suffered its second consecutive monthly
sales drop. It saw sales fall 7% in December, after a 9% drop in November. The
metric is based on revenue at stores opened at least a year.
The company’s total revenue dropped 4% to $2.01 billion for
the five-week period. The results underscore the continued challenges that CEO Art
Peck confronts in turning around the business. The company has long been
struggling to turn around its Gap namesake business and improve business at
Banana Republic. And executives have said they wanted to use low-price Old Navy
as a model for performance. The company has worked to improve its fashions and
trimmed its fleet last year. But it hasn’t been able to improve sales. That has
led the company to discount heavily, which erodes profits.
Last fall, Old Navy President Stefan Larsson, who
spearheaded the growth of the division, resigned to take the CEO job at Ralph
Lauren Corp. Then, the creative director for the Banana Republic brand, Marissa
Webb, who was hired to re-energize Banana Republic, stepped down after dismal
results. Gap’s shares dropped more than 7% in pre-market after gaining nearly
6% Thursday to close at $26.74. Shares have been down nearly 40% for the past
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