Gap pulls full-year outlook on CEO search

Bloomberg

Gap Inc.’s shares rose in late trading as investors took solace in higher-than-expected earnings and improving sales trends even as the chain withdrew its full-year projections.
The apparel retailer said macroeconomic uncertainty and its ongoing search for a new executive officer sparked the decision to pull the guidance. Still, the company saw “an improvement in sales trends in July and into August consistent with many other retailers.” Gap expects to reduce its elevated inventory levels — which have contributed to its recent troubles — by the end of fiscal 2022 from a year earlier.
“We are taking actions to better optimize profitability and cash flow in the near term, reducing operating costs as well as impairing unproductive inventory,” said Chairman Bob Martin, who took over as interim CEO after Sonia Syngal was ousted from the company last month.
Second-quarter earnings per share were 8 cents, while 15 analysts polled by Bloomberg were looking for a 7-cent loss.
UBS analyst Jay Sole said ahead of the report that even a meaningful reduction in the outlook wouldn’t be enough to give investors’ confidence that “earnings have reached a bottom.” Now, by withdrawing its guidance, the company is wiping the slate clean.
Still, Gap remains under pressure after missteps such as the clumsy implementation of expanded women’s sizes at Old Navy. The company’s board is currently looking for a Syngal’s replacement. Gap’s merchandise margins took a hit in large part because of higher discounting at Old Navy coupled with commodity inflation.