Gap Inc. reported fiscal first-quarter results on Thursday that fell well short of analysts’ expectations, sending the company’s stock tumbling more than 10% in after-market trading.
The downbeat performance comes three months after the retailer said it was creating two independent publicly traded companies — low-priced juggernaut Old Navy and a yet-to-be named company that will hold the iconic Gap brand and Banana Republic, as well as the lesser known names Athleta, Intermix and Hill City.
The San Francisco-based company said the spin-off will enable each company to focus on flexibility and pare down costs.
The company reported fiscal first-quarter net income of $227 million, or 60 cents per share, up from $164 million, or 42 cents per share, in the year-ago period. Earnings, adjusted for non-recurring gains, were 24 cents per share.
The results fell short of Wall Street expectations. The average estimate of 10 analysts surveyed by Zacks Investment Research was for earnings of 31 cents per share.
“This quarter was extremely challenging, and we are not at all satisfied with our results,” said Art Peck, president and CEO of Gap in a statement.
The clothing chain posted revenue of $3.71 billion in the period, down from $3.78 billion in the year-ago period. Sales also fell short of Street forecasts. Eight analysts surveyed by Zacks expected $3.76 billion in the latest quarter.
Gap’s overall global sales at stores opened at least a year fell 4% for the quarter. By brand, Old Navy had a 1% drop, while Gap suffered a 10% drop. Banana Republic recorded a 3% decline.
Gap expects adjusted full-year earnings in the range of $2.05 to $2.15 per share. Analysts expected $2.45 per share, according to FactSet.
Gap’s stock fell $2.18 to $18.42 in after-market trading on Thursday.
The shares have dropped 20% since the beginning of the year, while the Standard & Poor’s 500 index has risen 11%.