American clothing retailer Gap's net sales grow by 2% in Q3 FY22

Store sales increased 1 per cent in Q3 FY22 compared to Q3 FY21. Gap, Inc ended the quarter with 3,380 store locations in over 40 countries, of which 2,743 were company operated.

The company’s reported operating income in Q3 FY22 was $186 million, compared to $153 million in Q3 FY21, while the reported operating margin was 4.6 per cent, compared to 3.9 per cent for the corresponding period of last year. Reported operating income and margin include a $83 million gain related to the sale of the company’s UK distribution centre and $53 million in impairment charges related to Yeezy Gap.

In Q3 FY22, adjusted operating income was $156 million, compared to $170 million in Q3 FY21, while adjusted operating margin was 3.9 per cent, compared to 4.3 per cent, the company said in a press release.

The company’s reported gross margin for Q3 FY22 was 37.4 per cent, compared to 42.1 per cent in Q3 FY21, while the adjusted gross margin was 38.7 per cent, compared to 41.9 per cent for the corresponding period of last year. On a reported basis, merchandise margin declined 480 basis points versus last year.

Gap’s reported net income in Q3 FY22 was $282 million, compared to a loss of $152 million in Q3 FY21. Furthermore, the adjusted net income in the third quarter of fiscal 2022 was $260 million, compared to $102 million in Q3 FY21.

The company’s reported diluted earnings per share in Q3 FY22 was $0.77, compared to the negative diluted earnings per share of 0.40 in Q3 FY21.

Gap, Inc ended the year with cash and cash equivalents of $679 million, compared to $801 million for the same period of the previous fiscal. Year-to-date (YTD) net cash from operating activities was an outflow of $112 million, compared to the inflow of $682 million for the corresponding period of the previous year. Year-to-date free cash flow, defined as net cash from operating activities less purchases of property and equipment, was an outflow of $689 million, compared to the inflow of $196 million for the same period of the previous year. The company’s YTD inventory was $3.04 billion, up 12 per cent YoY, which includes a 13-percentage point benefit related to lapping last year’s higher in-transit inventory.

In terms of Gap’s primary divisions, net sales of Old Navy in Q3 FY22 were $2.1 billion, up by 2 per cent compared to the third quarter of last year. Comparable sales for Old Navy went down by 1 per cent.

For the Gap brand, net sales of $1.04 billion in Q3 FY22 were flat compared to last year. Global comparable sales of Gap were up 4 per cent, while North America comparable sales were flat.

For Banana Republic, net sales were $517 million in Q3 FY22, up by 8 per cent compared to last year. Comparable sales were up 10 per cent.

For the Athleta division, net sales in Q3 FY22 were $340 million, up by 6 per cent compared to last year. The brand’s comparable sales were flat.

For fiscal 2022 outlook, the company anticipates that total net sales could be down mid-single digits YoY in the fourth quarter of fiscal 2022.

Gap, Inc anticipates that air freight expense will continue to normalise and it anticipates approximately $245 million of incremental air freight investment in the fourth quarter of last year. The company expects roughly 540 basis points of margin leverage in the fourth quarter of fiscal 2022 compared to the fourth quarter of fiscal 2021.

Gap, Inc continues to target total inventories below prior year levels by the end of fiscal 2022 as a result of its inventory actions and reduction of receipts. By spring, the company expects to begin to capitalise on its responsive levers, providing the flexibility to better align inventory levels with demand trends.

The company continues to expect capital expenditures of approximately $650 million in fiscal 2022.

Fibre2Fashion News Desk (DP)