GAP Fall Into A Fully Regressive First Quarter Earnings Guidelines Were Downgraded

The Gap Inc. (NYSE:GPS) GAPP group described the sale as a "challenging challenge" to fall back into the first quarter of the sale again, and significantly reduced the annual profit guidelines, which brought worries to the largest brand Old Navy Old Navy's spin off pactions.

Investors in the latest financial season to the retail industry "butcher knife" also mercilessly chop Gap Inc. (NYSE:GPS), cap Pu Group shares early Friday 16.9% water, the biggest decline since 2016.

Due to its involvement, the two largest apparel retailers in the world, Inditex SA (ITX.MC) Indo Textile Group and Hennes & Mauritz AB (HMb.ST) Haines Maurice group, also lost 4.2% and 5.7% respectively.

In the first quarter of May 4th, comparable sales of the Old Navy Navy decreased by 1% year-on-year, the first decline since the first quarter of 2016, while analysts expected an increase of 0.8%.

For many years, Gap's brand has deteriorated further than sales decline from 4% in the same period last year and 5% in the four quarter to 10%.

The Banana Republic Banana Republic, which failed to stabilize the recovery, also increased from 3% in the four quarter to 3%.

The group's overall sales fell by 4% compared to the same period last year, but it failed to grow in the two quarter, and analysts expected a 1.2% decline.

Group president and chief executive officer Art Peck said in the earnings report that he was "very dissatisfied" with the results and pointed out that there were many adverse external conditions in the first quarter. At first, the weather was extremely cold and rainy, which led to a very low business in February. Moreover, the spring break and Easter were late, and the rebate bonus was also dropping. Chief financial officer Teri List-Stoll added that the overall weak retail environment of clothing aggravated the negative factors.

Teri List-Stoll revealed that the Old Navy team of Old Navy has found the crux of its weak product lineup and difficult to satisfy consumers' needs for different shapes, patterns and colors. It is expected that the supply will improve from autumn.

Product problems and the impact of weather on the physical passenger flow have also led to an increase in discount sales in the quarter. Management has started to adjust from procurement, and it is expected that the profit margin for the rest of the fiscal year can be gradually improved.

Teri List-Stoll emphasized that the Old Navy Old Navy's brand fundamentals remained strong, and the market share continued to expand.

Art Peck also said that "there is no confidence in the plan to create two independent listed companies in 2020", and revealed that the group has set up a "project management office" to ensure a smooth pition.

Gap Inc. Cape Group intends to set up a new company that accommodates Gap cover brand, Banana Republic Banana Republic, fitness yoga brand Athleta, high-end fashion retailer Intermix, and new men's sports brand Hill City, with annual revenue of US $9 billion, while the annual sales of US $8 billion Old Navy Old Navy brand will become self-contained.

RBC Capital Markets plus Huang capital market analyst Kate Fitzsimons believes that the feasibility of such a complex paction under the current circumstances will inevitably be questioned.

Wells Fargo & Co. Ike Boruchow, an analyst at Wells Fargo Bank, also pointed out that in view of the past implementation of the group, they now need to recover not only the three businesses that account for more than 90% of the group's revenues, but also the five years of the recovery of the Gap cap brand and the Banana Republic Banana Republic, and at the same time, it is also very unfavorable to promote the old navy of splitting Old Navy.

Wedbush estimates that the valuation of the old navy of Old Navy is likely to be under pressure.

Neil Saunders, general manager of GlobalData Retail, criticized the Gap brand in the Research Report: "every quarter management claims that the product is improving, and the business is working to meet the changing needs of consumers." however, the brand stores in the quarter are still full of dull products with no recognition for 20 years.

Net sales of Gap Inc. Cape group fell by 2% to $3 billion 706 million in the first quarter, less than $3 billion 770 million expected by the market.

Gross margin dropped by 140 basis points to 36.3%.

Net profit rose 38.4% to 227 million US dollars compared with the same period last year. EPS also rose to 0.60 US dollars from 0.42 US dollars in the same period last year, but adjusted EPS only 0.24 US dollars, which is 1/4 lower than the 0.32 US dollars expected by the market.

Management has adjusted the annual adjusted EPS guidelines from $2.40-2.55 to $2.05-2.15, and is expected to have a lower digit drop than the sales volume, which was expected to remain unchanged at least.

Art Peck told analysts that the current performance guidelines did not take into account the impact of potential tariff changes.

He pointed out that in the past few years, the group continued to reduce Chinese purchases. Now the proportion of Chinese products has dropped to 25% from three years ago to 21%, and the proportion of clothing is only about 16%, far below the level of peers.

While the group released its quarterly results on Thursday, President Trump announced a 5% tariff on all imported goods in Mexico, and threatened to raise taxes to 25%. As a bargaining chip, the U.S. retailer is faced with a big problem as a bargaining chip with a geographical advantage and Mexico as one of the main buyers of American clothing.

Gap Inc. (NYSE:GPS) closed $18.68 on Friday, narrowing to 9.3% in the full day, and has fallen 36.7% since the announcement of its spin off plan in February 28th.

Instinet lowered the target price of Gap Inc. (NYSE:GPS) from US $22 to US $10, and Wedbush lowered the target price from US $23 to US $19, which is rated as "neutral".

Analysts say that the uncertainty of the tariff outlook makes investors reluctant to buy fashion or retail stocks, even if signs of weak performance can easily stimulate investors to sell.

Among the fashionable listed companies released quarterly this week, Abercrombie & Fitch Co. (NYSE:ANF) and Canada Goose Holdings Inc. (TSE:GOOS) Canada goose fell 26% and 31% respectively on Wednesday, while women's retailer J.Jill Inc. (NYSE:JILL) was the most tragic, and the market value evaporated 60% on Thursday and 52 days.

Author: Lin Biying