Online sales, which represented 38 per cent of total net sales, decreased 7 per cent in FY22 compared to the previous year, the company said in a press release.

The reported gross margin in FY22 was 34.3 per cent, while the adjusted gross margin was 35 per cent, deleveraging 480 basis points versus the previous year. The merchandise margin declined 500 basis points versus the previous year, adjusted for the impairment charges.

Rent, occupancy, and depreciation (ROD) deleveraged 50 basis points versus last year primarily due to lower comparable sales. Reported operating loss was $69 million, while reported operating margin was negative 0.4 per cent. Adjusted operating loss was $6 million.

The reported net loss was $202 million, with reported diluted loss per share of $0.55. Adjusted net loss was $145 million, excluding the impairment charges, costs related to the Old Navy Mexico transition, and gain on sale; adjusted diluted loss per share of $0.40. Ending inventory of $2.39 billion was down 21 per cent YoY.

In the fourth quarter (Q4) of FY22, net sales were $4.24 billion, a 6 per cent decline YoY, with comparable sales down 5 per cent. Online sales decreased by 10 per cent, representing 41 per cent of total net sales. Store sales decreased 3 per cent compared to last year, while comparable sales were down 5 per cent YoY.

Gross margin in Q4 FY22 was 33.6 per cent, deleveraging 10 basis points versus last year. Operating loss was $30 million, with a net loss of $273 million. Old Navy's Q4 net sales were down 6 per cent to $2.2 billion, with comparable sales down 7 per cent. Gap brand’s Q4 net sales were down 9 per cent to $1.1 billion, and Banana Republic's net sales were down 6 per cent to $578 million. Athleta's Q4 net sales were down 1 per cent to $436 million.

For Q1 FY23, Gap Inc is estimating first quarter net sales to decrease in the mid-single-digit range compared to net sales of $3.5 billion in Q1 FY22. The company anticipates that FY23 net sales could decrease in the low to mid-single-digit range compared to net sales of $15.6 billion in FY22. The company expects first quarter and FY23 gross margin expansion compared to the prior year.

“To enter fiscal 2023 in a more competitive position, we took quick and effective action to clear excess inventory, improve assortment balance, particularly at Old Navy, and to meaningfully optimise our cost structure, resulting in $550 million in annualised savings identified to date,” said Bob Martin, executive chairman and interim CEO of Gap Inc. “The board is getting close to choosing the next CEO for Gap Inc As a result of the work we have underway to build a stronger foundation and restore the company’s creative muscle, we are optimistic that this will provide our new leader with a quicker ramp in driving consistent, profitable growth over the long term.”

Fibre2Fashion News Desk (DP)