Gap shares drop as store traffic comes down

Bloomberg

Gap Inc., the biggest US apparel-focused retailer, fell in late trading after posting July comparable sales that missed analysts’ estimates and indicated that foot traffic at its stores might not improve as much as expected later in the year.
Same-store sales — a key benchmark — dropped 4 percent in July, the San Francisco-based retailer said in a statement Monday. Analysts had predicted a decline of 1 percent, according to Retail Metrics. Preliminary earnings ranged from 58 cents to 59 cents a share in
the second quarter, excluding the impact of store closures and initiatives to streamline the business. That topped the 48 cents estimated by analysts.
“While adjusted earnings results for the quarter showed improvements from the first-quarter trend, it is important to acknowledge that performance was uneven within the quarter, with challenging traffic in May and July,” Jack Calandra, senior vice president of investor relations, said on a recorded sales call. “As such, we’re maintaining a cautious view of the retail environment in the second half.”

SHORT-LIVED RECOVERY
The results stoked investor concerns that sales won’t get a needed boost from the back-to-school and holiday shopping seasons. Chief Executive Officer Art Peck, who took over the job last year, has said results would begin to improve at the Gap and Banana Republic brands this spring, but the recovery has been short-lived. While sales and traffic trends improved in June, they worsened in July, when many shoppers should be stocking up on clothes for the new school year.
Shares of Gap slipped 5.3 percent to $24.25 in late trading after the results were released. The stock had gained 3.7 percent this year through the close of regular trading Monday. Gap is scheduled to report its full second-quarter results on Aug. 18.
Comparable sales plunged 14 percent at Banana Republic in July, more than the 4.6 percent decline expected by Retail Metrics. Sales by that measure were flat at Old Navy, missing estimates for a 1.1 percent increase. Gap’s sales slipped 4 percent, compared with estimates for a 1.5 percent decrease.
The results mark the 15th monthly same-store sales decline in the last 16 months, according to Ken Perkins, an analyst at Retail Metrics Inc. “July proved to be difficult for retailers as hot weather, record Amazon Prime Day sales, the distractions of the beach and the Pokemon Go craze weighed on sales,” Perkins wrote in a note to clients after the results.