What Was So Great With The Gap’s September Sales?


gap september sales?

Shares of Gap (NYSE: GPS) soared higher by around 15 percent after the retailer reported its

September sales metrics.

The company operates several stores, including its core Gap store along with Old Navy and Banana Republic.  Like many of the company’s peers, it has fallen out of favor with investors in a difficult retail environment that is plagued with competitive pressures, the need for constant discounting, a challenging global environment – not to mention the rise of “fast fashion” players such as Zara, H&M and Forever 21.

As such, Gap’s stock is lower by nearly 8 percent even when including Friday’s near 15 percent gain.  Investors have become irritated with the company’s reputation of being over-priced and slow to adapt to new trends.  However, its Old Navy unit has proven to be a bright spot as the more budget friendly retailer is a favorite among shoppers looking to balance fashion with cost.

So when Gap reported its September monthly sales metrics, as it does every month, investors were bracing for a disappointing data set.  What investors got instead was an encouraging, albeit not spectacular read through.

The company said that its total net sales for the five-week period ending October 1 fell 2 percent to $1.43 billion.  Comparable sales for the same period also fell 3 percent which most certainly isn’t an improvement from the 1 percent decline the company reported in the same period a year ago.

The company noted that its merchandise margin rates actualized significantly higher than previously expected and this fact more than offset the negative impact from lost sales and heightened logistic costs due to a fire at a distribution center in New York.

The company also provided the following breakdown by global brand.

Gap’s comparable sales were negative 10 percent in the month, Banana Republic’s comparable sales were negative 4 percent but Old Navy’s momentum continued as its comparable store sales were positive 4 percent.

In fact, Old Navy’s positive comparable store sales includes a negative impact of approximately 2 percentage points from the fire at its warehouse in New York.

It appears that investors are hopeful of an eventual turnaround in Gap’s core brand as well as Banana Republic.  Coupled with its Old Navy unit that is performing just fine, investors are hoping the company could be a retail and fashion leader.