Gap beats revenue estimates due to strong demand for Banana Republic apparel

A man walks past a Gap store on Oxford Street in London, Britain July 1, 2021. REUTERS/John Sibley

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Aug 25 (Reuters) – Gap Inc (GPS.N) beat revenue estimates on Thursday on strong sales at its Banana Republic division, but withdrew its full-year forecast as the clothing chain struggles with a buildup of inventory and lukewarm demand for obsolete Old Navy items.

People have opted for suits, dresses, and skirts over casual wear as they venture out to social events, the office, and travel more, with demand for affordable luxury that Banana Republic specializes in. stability.

Gap said selling trends improved in July and August, coinciding with lower gasoline prices, pushing its shares up 6% in extended trading.

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Second-quarter net sales of $3.86 billion beat Wall Street expectations of $3.82 billion, buoyed by a 9% rise in Banana Republic sales, even as Gap struggled to sell outdated clothes at Old Navy.

U.S. clothing retailers including Kohl’s (KSS.N) and Abercrombie & Fitch have warned of steep discounts to offload excess inventory of casual wear, which was popular at the height of the pandemic. Read more

“Our high inventory and squeezed margins are current realities in the face of volatile market conditions,” said Gap Executive Chairman Bob Martin. Read more

The company, which recorded an inventory impairment charge of $58 million, said inventory at the end of the second quarter was 37% higher than a year earlier.

The Athleta brand owner, who is in the midst of a CEO transition following the departure of Sonia Syngal last month, said it will open up to 30 Old Navy stores this year, up from an earlier expectation of 40 new stores.

Gap in May had forecast adjusted earnings per share for fiscal year 2022 between 30 cents and 60 cents and a decline in revenue of a low to mid-single digit percentage.

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Reporting by Praveen Paramasivam in Bengaluru; Editing by Vinay Dwivedi

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