Gap Inc. Reports Third Quarter Fiscal 2022 Results

GAP INC. (NYSE: GPS), a portfolio of purpose-led, billion-dollar lifestyle brands including Old Navy, Gap, Banana Republic, and Athleta, and the largest specialty apparel company in the U.S., today reported financial results for its third quarter ended October 29, 2022.

“I have deep conviction that we have a portfolio of iconic brands that our customers love, increased confidence in our platform to drive leverage and economies of scale, and belief in the team’s ability to deliver. We have sharpened our focus on execution to optimize profitability and cash flow, are bringing more rigor to our operations, and balancing our assortments in response to what our customers are telling us. While our efforts show early signs of improvement, we are clear that there is work to be done to deliver what our customers, employees and shareholders expect from Gap Inc.” said Bob Martin, Executive Chairman and Interim CEO, Gap Inc.

Third Quarter Fiscal 2022 – Financial Results:
*Net sales of $4.04 billion, up 2% compared to last year. Comparable sales were up 1% year-over-year.
-Online sales increased 5% compared to last year and represented 39% of total net sales.
-Store sales increased 1% compared to last year. The company ended the quarter with 3,380 store locations in over 40 countries, of which 2,743 were company operated.
*Reported gross margin was 37.4%; adjusted gross margin, excluding $53 million in impairment charges related to Yeezy Gap, was 38.7%, deleveraging 320 basis points versus last year.
-On a reported basis, merchandise margin declined 480 basis points versus last year; adjusted for the impairment charge, merchandise margin declined 370 basis points. Merchandise margins were negatively impacted by higher discounting and inflationary commodity price increases and partially offset by lapping last year’s higher air freight expense.
-Rent, occupancy, and depreciation (ROD) leveraged 10 basis points versus last year primarily due to higher sales volume during the quarter; excluding a Yeezy Gap impairment charge, ROD leveraged 50 basis points versus last year.
*Reported operating income was $186 million; reported operating margin of 4.6%. Reported operating income and margin include a $83 million gain related to the sale of the company’s UK distribution center and $53 million in impairment charges related to Yeezy Gap.
*Reported net income of $282 million. Reported net income includes an income tax benefit of $114 million related to the cumulative impact of a change in estimated annual tax rate as a result of quarterly earnings variability.
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