The tried-and-true formula of trendy casual wear at a bargain price was the right formula for Old Navy, a division of Gap Inc.
In its first-quarter earnings report for the period ending May 5, Gap Inc. said that Old Navy’s same-store sales were up 3 percent, but that was still off from the same period last year when Old Navy comps showed a strong 8 percent increase.
Still having trouble was the San Francisco company’s principal nameplate, Gap. Gap’s same-store sales declined 4 percent in the first quarter compared with the same period last year.
The Gap stores have been experiencing a lack of depth in some products and inventory overstock, left over from last year. The excess inventory led the company to slice prices to get rid of excess merchandise, said Teri List-Stoll, Gap’s chief financial officer and executive vice president, who was speaking on a May 24 earnings call. “During the quarter, we cleared inventory through sell-offs and cut prices,” she said. “It does set us up for cleaner stores in the second quarter and a better inventory position for the back half of the year.”
Gap stores have been going through a difficult year. In February, the company fired its Gap brand president, Jeff Kirwan, and replaced him with Brent Hyder, who is the acting Gap brand president.
In a welcome change, the company’s Banana Republic division saw comp-store sales rise 3 percent compared with last year’s negative 4 percent. Art Peck, Gap’s president and chief executive officer, said the company has been investing in quality yarns and fabrics for its Banana Republic clothing, which has been well received by customers. Items that sold well included sweaters, bottoms and dresses.
Overall, same-store sales for the company were up 1 percent across the board compared with 2 percent last year.
Gap Inc. reported that net income for the first quarter totaled $164 million, up from $143 million in the first quarter of 2017. Net sales came in at $3.8 billion, a 10 percent rise over last year.
At the end of the quarter, Gap Inc. had 3,617 stores in 45 countries, of which 3,171 were company-operated. Gap executives said they continue to invest in stores such as Old Navy and its activewear brand store Athleta while closing less profitable Gap and Banana Republic stores, located mostly in malls.