US' Gap Inc reports net sales of $3.8 bn, up 2% YoY in Q3 FY24

Online sales of the brand increased 7 per cent YoY and represented 40 per cent of total net sales. Gross margin of 42.7 per cent YoY increased 140 basis points. Merchandise margin increased 90 basis points versus the same period in FY23, primarily driven by improved inventory management, Gap Inc said in a press release.

Rent, occupancy, and depreciation (ROD) as a per cent of sales leveraged 50 basis points versus last fiscal. Operating expense for the company was $1.3 billion. Operating income was $355 million, with an operating margin of 9.3 per cent YoY. The effective tax rate was 24 per cent YoY, and the net income of the company was $274 million, with diluted earnings per share (EPS) of $0.72. The company ended the quarter with 3,603 store locations in about 40 countries, of which 2,544 were company operated.

Brand-wise, Old Navy’s Q3 net sales were $2.2 billion, up 1 per cent YoY compared to last year, however, comparable sales were flat. The brand's continued focus on operational rigor and brand reinvigoration drove solid performance in the quarter, despite lapping tougher compares and facing weather-related headwinds.

Third quarter net sales for Gap were $899 million, up 1 per cent YoY compared to last year. Comparable sales were up 3 per cent YoY representing the fourth consecutive quarter of positive comparable sales at the brand. Gap's strong product and marketing execution have helped drive continued momentum and consistent results at the brand.

For Banana Republic, net sales reached $469 million, up 2 per cent YoY compared to the same quarter of last year. Comparable sales were down 1 per cent YoY. The brand saw strength in its men's business during the quarter and remains focused on fixing the fundamentals.

Athleta’s net sales of $290 million were up 4 per cent compared to Q3 FY23. Comparable sales were up 5 per cent. As expected, the brand returned to positive comparable sales in the quarter as its new product and marketing are resonating with customers.

"I am proud that Gap Inc delivered another successful quarter, growing net sales for the 4th consecutive quarter and gaining market share across all brands while meaningfully expanding operating margin. Consistent execution of our strategic priorities, including the rigor and repetition we're applying to our brand reinvigoration playbook, is making us a stronger company and demonstrates our continued progress in unlocking Gap Inc's full potential," said Richard Dickson, president and chief executive officer (CEO) of Gap Inc.

39 weeks (9M) period financials

Net sales for the nine months period were $10,937 million in FY24, compared to $10,591 million in the same period in FY23. Cost of goods sold, and occupancy expenses decreased to $6,322 million from $6,488 million in the same period last fiscal, while gross profit improved to $4,615 million from $4,103 million in the 9M period last fiscal.

The operating expenses slightly increased to $3,762 million from $3,757 million from 9M last year. The operating income rose significantly to $853 million compared to $346 million in 9M FY23. Net interest changed to an expense of $12 million from an income of $8 million in 9M last year. Income before income taxes increased to $865 million from $338 million last year’s same period. Income tax expense increased to $227 million compared to $21 million last year. Net income was more than doubled to reach $638 million from $317 million in FY23. Diluted earnings per share (EPS) grew to $1.67 from $0.85.

Fiscal 2024 outlook

For the full fiscal 2024, the company projects net sales growth of 1.5 to 2.0 per cent on a 52-week basis, compared to the prior outlook of a slight increase over the same period. This marks an improvement from FY23 net sales of $14.9 billion. Gross margin is expected to expand by approximately 220 basis points, up from the previous forecast of 200 basis points expansion and an improvement from the 38.8 per cent gross margin achieved in FY23.

Fibre2Fashion News Desk (SG)