Gap Inc. Reports Second Quarter Fiscal 2023 Results

“I have long admired Gap Inc. as a customer, a brand builder, and most recently, as a Board member. An even greater draw is the company’s storied brands. And I’m excited for the opportunity to lead the incredible people of Gap Inc. to unlock our full potential,” said Richard Dickson, President and Chief Executive Officer, Gap Inc. “We’re seeing encouraging signs of progress, as our teams streamline the way we work so we can focus on growth-driving initiatives – a virtuous cycle that we’ll look to become our norm. This means we have to do things differently, with a clear focus on redefining our brands’ meaning to consumers, focusing on creativity, designing for relevance as a pursuit rather than a goal, and leveraging our remarkable legacy to shape an exciting new future.”

“We are pleased to deliver meaningful operating margin expansion and strong free cash flow during the second quarter driven by modest market share gains, our significantly improved inventory position, and our actions to transform the company’s operating model and structure,” said Katrina O’Connell, Executive Vice President and Chief Financial Officer, Gap Inc. “While we are encouraged by our near-term progress, we remain mindful of the mixed economic and consumer environment in which we are operating and continue to plan the business prudently.”

Second Quarter Fiscal 2023 – Financial Results
*Net sales of $3.55 billion, down 8% compared to last year, inclusive of an estimated 1-point foreign exchange headwind and 2 percentage points of negative impact from the sale of Gap China.

  • Comparable sales were down 6%.
    *Gross margin of 37.6% increased 310 basis points versus last year’s reported gross margin and increased 160 basis points versus last year’s adjusted gross margin which excluded $58 million in inventory impairment charges.
    *Reported operating income was $106 million; reported operating margin of 3.0%.
    *The effective tax rate was negative 8.3%. During the quarter, the company recorded a tax benefit as a result of a transfer pricing settlement related to its sourcing activities.
    *Reported net income of $117 million; reported diluted earnings per share of $0.32.
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