Gap reports strong Q4 as turnaround shows no signs of slowing
Gap Inc. maintained its turnaround momentum during the holiday quarter, reporting sales and earnings that topped Street expectations and a big comp sales increase across its namesake division.
In fiscal 2024, the apparel giant posted its highest gross margin in more than 20 years. The retailer also delivered positive comps in all four quarters.
“These strong results are underpinned by the momentum we're seeing in our operational execution, our culture and the reinvigoration of our brands as they climb in the cultural conversation,” stated CEO Richard Dickson in the earnings release.
Dickson, who took the reins of the company in August 2023, is credited with bringing the company back to growth and re-engergizing its brands.
[READ MORE: Gap Inc. taps toy executive as its new CEO]
On the earnings call, Dickson said the company expanded its customer base in 2024, and that a new generation is being attracted to its namesake banner.
“Gap is back in the cultural conversation,” Dickson told analysts on the call. “This brand was built on strong product narratives with brilliant marketing expressed through big ideas, and over the past year, each of these were reignited.”
The retailer reported net income of $206 million, or $0.54 per share, for the quarter ended Feb. 1, compared with $185 million, or $0.49 per share in the year-ago period. Analysts had expected earnings per share of $0.37.
Sales fell 3% to $4.15 billion, topping analysts estimates of $4.07 billion. (Similar to other retailers, Gap benefited from an extra selling week in the year-ago period, which negatively skewed comparisons.) Online sales represented 41% of total net sales.
Comparable sales, driven by strong shopper response to denim and active categories, increased 3%, more than expected. It was the company’s fourth consecutive quarter of comp increases.
Below are comp sales by divisions.
•Old Navy: Comparable sales were up 3%. The company said the brand continues to win in key categories, such as active and denim, with innovation and newness driving strength and market share gains.
•Gap: Comparable sales were up 7%.
•Banana Republic: Comparable sales were up 4%. The brand saw notable improvement in its women's business during the quarter and continues to build on its strength in men's.
•Athleta: Comparable sales fell 2%. Athleta maintained market share in the quarter, but there is still work to do to improve the brand's execution in order to position it to regain momentum, Gap said.
"We ended the year delivering another successful quarter, exceeding financial expectations and gaining market share for the 8th consecutive quarter," stated Dickson in the earnings release. "For the full year 2024, Gap Inc. delivered positive comps in all four quarters, achieved one of the highest gross margins in the last 20 years and meaningfully increased operating margin versus the prior year.”
For its current fiscal year, Gap expects sales to increase between 1% and 2%, which is generally in line with expectations of up 1.7%.
While tariff headwinds have played into many retailer’s fiscal 2025 outlooks, Gap downplayed the impact. On the earnings call, CFO Katrina O’Connell said that the company has sourced less than 10% of its product from China, and less than 1% from Canada and Mexico combined.
As of Feb. 1, Gap had a total of company-operated 2,506 stores and 1,063 franchised stores.
