Gap (GPS) earnings Q1 2024

gap reported positive comparable sales across all 4 of its brands on Thursday, prompting the apparel giant to boost its full-year forecast as CEO Richard Dickson’s turnaround strategy begins to take effect.

The retailer behind Gap, Banana Republic, Athleta and Old Navy beat earnings estimates and in addition exceeded expectations for sales.

Here’s how Gap performed in comparison with Wall Street expectations, based on an analyst survey conducted by LSEG:

• Earnings per share: 41 cents in comparison with expected 14 cents
• Revenue: $3.39 billion versus expected $3.29 billion

Gap’s share price rose greater than 20% in prolonged trading Thursday.

The company reported first-quarter net income of $158 million, or 41 cents per share, compared with a lack of $18 million, or 5 cents per share, within the year-ago period.

Revenue rose about 3% to $3.39 billion within the period ended May 4, from $3.28 billion a yr earlier.

It is “the first time in many years that all four brands have positive comparables. In fact, we have been looking for such points in time, but it has been difficult to find them,” said CEO Richard Dickson in an interview with CNBC.

“We are very confident about our quarter and that has given us the confidence to raise our full-year 2024 guidance, both revenue guidance and operating margin. … It continues to demonstrate, if you will, our confidence that our priorities are really taking shape,” he added. “The company culture is being revitalized and we are delivering on what we promised our shareholders.”

Gap now expects a “slight” increase in net sales, while the previous forecast was for flat sales. The company expects gross margins to extend by at the least 1.5 percentage points, while the previous forecast was for at the least half a percent.

The biggest change in Gap’s guidance is its operating income outlook. The company now expects operating income growth within the mid-40 percent range, in comparison with the previous forecast of low- to mid-double-digit growth.

Dickson, who took the helm at Gap in late August, is a marketing guru working to reinvigorate the corporate’s portfolio of brands, specializing in telling brand stories and bringing names like Gap and Old Navy back to the middle of the culture.

Some of this will already be seen.

Earlier this month, actress Da’Vine Joy Randolph wore a denim ball gown designed by Gap’s latest creative director Zac Posen to the Met Gala in Manhattan. Just a few weeks later, actress Anne Hathaway wore a white Gap shirt dress, also designed by Posen, to a Bulgari party.

“We were so excited to see [Hathaway’s dress] available in the market and in addition with consumers so that they have the chance to purchase it,” Dickson said. “We proceed to imagine that higher storytelling through marketing and modern media will resonate.”

He told CNBC the quarter’s success was due to “consistency and financial and operational discipline,” adding that the company’s average selling prices are back to pre-pandemic levels thanks to lower inventory levels leading to better sales. But better designs and marketing are also simply making consumers buy more.

Here’s a closer look at each brand’s performance:

• Old Navy: Net sales of $1.9 billion were up 5% year over year, while comparable sales rose 3%, worse than the 4.9% increase expected by analysts. Asked about the worse-than-expected results, Dickson said the brand posted its “highest quarterly sales in three years,” which he sees as a success. He noted that the women’s business was strong and “positive leads to energetic” – ​​a “key category” for the company.

• Banana Republic: Revenue of $440 million rose 2% year over year. Comparable sales rose 1%, well above estimates for a 1.9% decline. The growth also comes on top of an 8% decline in the year-ago period.

• Athleta: Revenue of $329 million rose 2% year over year. Comparable sales rose 5% after falling a staggering 13% in the year-ago period. Analysts had no expectations for Athleta’s comparable sales.

• Gap: Revenue of $689 million was flat year-over-year. Comparable sales increased 3%, in line with estimates. “Gap’s performance was primarily driven by strong marketing and product execution across the Linen Moves campaign,” the company said.