Gap Inc. ‘Powers’ Through Strong First Quarter

Executives said strategic initiatives focused on growing Old Navy and Athleta while downsizing Gap and Banana Republic are bearing fruit.

By David Moin on May 27, 2021

Gap Inc., crediting macro tailwinds and growth strategies taking hold, swung into profitability last quarter amid huge comparable sales gains.

The San Francisco-based operator of Gap, Old Navy, Banana Republic and Athleta reported a net profit of $166 million for the quarter ended May 1, versus a loss of $932 million in the year-ago period. Earnings per share were 44 cents versus a loss of $2.51 in the 2020 quarter.

Operating profits rose to $240 million compared to a loss of $124 billion in the year-ago period.

Net sales rose 89 percent to $3.99 billion last quarter from $2.11 billion a year ago, and were 8 percent above the 2019 quarter. Comparable sales were up 28 percent year-over-year, and up 13 percent from 2019.

Online sales grew 82 percent from the first quarter of 2019 and represented 40 percent of the total business. Store sales declined 16 percent versus the first quarter of 2019, primarily due to strategic closures and COVID-19 closures outside of the U.S.

“Our Power Plan 2023 is taking hold,” said Sonia Syngal, chief executive officer of Gap Inc., on Thursday. “Investments in demand-generation, coupled with macro tailwinds, supercharged our brands. Gap Inc. delivered sales growth of 8 percent over 2019 pre-COVID-19 levels, with particular strength at Old Navy and Athleta, a healthy and growing Gap business in North America, and market share gains that outpaced the industry.”

The company estimated that COVID-19-related closures in markets outside of the U.S. resulted in approximately 2 percent of sales decline versus 2019. Additionally, permanent Gap and Banana Republic store closings, as part of the “Power Plan 2023” strategy, reduced net sales by about 5 percent versus 2019 but were earnings accretive.