Gap Inc. (NYSE: GPS) reported quarterly losses amounting to nearly $1 billion due to store closures forced by the ongoing COVID-19 pandemic.
Gap’s first-quarter results are a reflection of the toll that the coronavirus has extorted on the retailer. While store closures eroded sales and merchandise margins, the company took a non-cash impairment charge of $484 million related to store assets and operating lease assets. It also took a $235 million non-cash inventory impairment charge.
Net loss reported for the quarter stands at $932 million or $2.51 per share for three months ended May 2. Net sales declined 43% to $2.11 billion from $3.71 billion.
Why It Matters
According to Sonia Syngal, CEO of Gap, more than 1,500 stores are open in North America, these amount to 55% of retail establishments in the region.
Gap revealed that a trend towards casual fashion has benefitted “other brands” in its portfolio, but brands like the Banana Republic were “disadvantaged.” However, its Athleta and Old Navy brands were seeing stronger customer response.
The retailer said it had suspended rent payments for its closed stores and was carrying out a strategic review of its real estate portfolio, orienting towards “a smaller, healthier fleet, particularly as it relates to its Gap brand and Banana Republic specialty fleets.”
Gap is not providing comparable sales results for the first quarter because, according to it, the metric “is not meaningful” due to temporary store closures. It said instead, it was providing net sales that consist of store sales and online sales for each brand.
GPS Price Action
Gap shares traded 5.52% lower at $11.47 in the after-hours session on Thursday. The shares had closed the regular session 1.59% higher at $12.14.
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