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Gap Sees $234M Q4 Profit, but Still Logs Losses for 2020

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Gap Inc.’s profits bounced back in the fourth quarter, but it wasn’t enough to make up for a tough year.

The retailer’s net earnings tallied $234 million, or 61 cents a diluted share, boosted on a per-share basis by a 45 cent nonrecurring tax benefit.

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The tax boost was partially offset by a 12 cent, or $56 million, impairment change tied to the Intermix trade name and store and operating assets. The business is still the subject of a strategic review.

Gap’s sales for the three months ended Jan. 30 slipped 5.3 percent to $4.4 billion, with flat comparable sales and a 49 percent increase in the e-commerce business.

Sales at the firm’s Old Navy business rose 5 percent, but the namesake Gap business was down 19 percent and Banana Republic was off 27 percent. Athleta proved to be the company’s fastest-growing business, expanding 29 percent in the quarter to top $1 billion sales for the full year.

The earnings over the holiday season were not enough to overcome losses from earlier in the year when the COVID-19 both forced a retail shutdown and altered consumer spending patterns.

For the year, Gap posted losses of $665 million, compared with earnings of $351 million in 2019, on a sales decline of 15.8 percent to $13.8 billion.

This year, Gap is looking for sales to grow by a percentage in the mid- to high-teens, anticipating that sales will “return to a more normalized, pre-pandemic level of net sales in the second half of 2021.”

Sonia Syngal, who took the helm of retail giant as chief executive officer a year ago, said: “We faced one of the most difficult years in our company’s history and, throughout, our teams showed resilience and determination as we navigated unprecedented disruption in our industry to set a course for long-term growth. Our powerful brands moved to offense with purpose-led marketing and strength in relevant categories, like active and fleece, allowing us to gain meaningful market share quarter-over-quarter in a fragmented environment. This was enabled by our $6 billion online business and advantaged digital capabilities allowing us to expand our reach to more than 183 million customers this year.”

The company cited NPD Group data that indicated that its market share by 0.2 percent points for the year to account for 5.5 percent of total U.S. apparel sales.

Since the company’s sales fell last year, that indicates that the company is getting a proportionally bigger piece of a smaller pie.

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