Why Gap (GPS) Shares Are Falling Today

Gap Inc GPS reported a fourth-quarter FY22 sales decline of 6% year-on-year to $4.24 billion, missing the consensus of $4.36 billion.
Comparable sales declined 5% versus Q4 2021. Online sales decreased 10% Y/Y.
Brand Sales: Old Navy declined 6%, Gap fell 9%, Banana Republic dropped 6% and Athleta decreased 1%.
Gross profit fell 6.5% Y/Y to $1.4 billion with a profit margin of 33.6%. Operating loss for the quarter totaled $(30) million versus an income of $8 million last year.
EPS of $(0.75) missed the analyst consensus of $(0.46).
The company held $1.27 billion in cash and equivalents as of Jan 28, 2023. For FY22, cash provided by operating activities totaled $607 million, with a free cash flow of $(78) million.
Inventory at the end of Q4 declined 21% Y/Y to $2.39 billion.
Cost Structure Optimization: Gap announced actions to further simplify and optimize its operating model and structure, including decreasing management layers. The company expects these actions to result in $300 million in annualized savings, of which roughly half is expected to be realized in the back half of fiscal 2023.
These actions are on top of the $250 million in annualized savings the company announced in the third quarter of fiscal 2022.
The company eliminated the role of Chief Growth Officer held by Asheesh Saksena. The company also announced that Mary Beth Laughton, President and CEO of Athleta, is exiting the business.
The company also announced that Sheila Peters, Chief People Officer, will leave the company at the end of the year.
Outlook: Gap expects Q1 net sales to decrease in the mid-single digit range compared to last year's net sales of $3.5 billion.
The company anticipates fiscal 2023 net sales to decrease in the low to mid-single-digit range compared to last year's net sales of $15.6 billion.
Price Action: GPS shares are trading lower by 5.61% at $10.93 in premarket on the last check Friday.
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Why Gap Shares Are Falling Today

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