Gap Inc. Reports Third Quarter Results
Net sales were flat year-over-year, reflecting a 61% increase in online sales, offset by a 20% decline in store sales. Notably, 40% of the company’s sales were online in the third quarter. As noted during the company’s Investor Meeting, held in October 2020, the company aspires to achieve 50% of its sales from online by the end of 2023. Third quarter fiscal year 2020 comparable sales were up 5%, driven by the strength of Gap Inc.’s scaled ecommerce business, which added over 3.4 million new customers during the quarter. The comparable sales calculation reflects online sales and comparable sales days in stores that were open. Gross margin was 40.6%, a 160 basis point improvement versus last year. This improvement is consistent with the strategic focus outlined in last month’s Power Plan 2023 discussion of opening highly-profitable Old Navy and Athleta stores, while also closing select unprofitable Gap and Banana Republic stores, yielding significant rent and occupancy savings. In addition, a lower level of promotions contributed to higher product margins in the quarter. The benefits of lower rent and occupancy and higher product margin were partially offset by higher shipping expenses associated with the company’s growth in online sales. Operating income was $175 million or 4.4% of net sales.