Nov 17 (Reuters) – Gap Inc (GPS.N) beat Wall Street estimates for quarterly sales and profit on Thursday, helped by continued demand from affluent consumers for its evening wear and dresses despite a surge in inflation, pushing its shares up about 10% in extended trade.
People prefer more formal clothes, dresses, woven tops and pants, casual wear like t-shirts and shorts as they return to travel, work and social occasions after two years of coronavirus-induced restrictions. the pandemic.
Gap’s Banana Republic, an affordable luxury brand, saw an 8% rise in sales, while its Old Navy brand, struggling with outdated clothing, saw a 2% increase.
However, Gap echoed retailer Kohl’s (KSS.N), which warned on Thursday that soaring commodity prices had dampened spending by low-income consumers on non-essentials like clothing.
It expects fourth-quarter net sales to be down mid-single digits, compared with analysts’ expectations of a 0.6% decline, according to Refinitiv IBES data.
“We saw strong volume in October slowing down a bit at the end and a bit of a slow start in November,” chief financial officer Katrina O’Connell said on a post-earnings call.
Gap is expected to continue to struggle over the next 12 months due to its low-to-middle-income consumer base and underperforming brands, said Zachary Warring, equity analyst at CFRA Research.
Heading into the holiday season and into 2023, discounts could continue for brands like Gap due to a weaker consumer, he added.
The company reported $53 million in impairment charges related to Yeezy Gap. In October, Gap pulled products from its Yeezy Gap line created in partnership with Kanye West, and shut down YeezyGap.com following the rapper’s anti-Semitic comments.
Gap’s third-quarter net sales rose 2.5% to $4.04 billion, beating analysts’ estimates of $3.80 billion. Excluding items, it posted a profit of 38 cents per share, versus expectations for a breakeven.
Reporting by Granth Vanaik and Ananya Mariam Rajesh in Bengaluru; Editing by Maju Samuel
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