Shares of The Gap Inc. (GPS) tumbled nearly 4.8% in the afterhours trade session yesterday as the company posted negative sales results battered by the harsh winter in February, which forced the closure of nearly 450 Gap stores.
The company posted a comps decline of 7% for the 4 weeks ended Mar 1, 2014, compared with a 3% increase in the prior-year period (4 weeks ended Mar 2, 2013). None of the company’s brands were exceptional as comps remained negative across the board.
Comps at Gap Global were down 10% compared with a 2% increase in the prior-year period. Old Navy Global's comps declined 6% versus a 6% increase last year, while comps at Banana Republic Global dipped 7%, against a 5% decline recorded last year.
Net sales for the month came in at $929 million, down 3.8% from $966 million reported for the prior-year period.
Though the sales for the shortest month of the quarter failed miserably, the company expects to deliver its fiscal 2014 forecasts as laid out in last week’s earnings results. Gap envisions earnings per share to lie in a band of $2.90–$2.95 for fiscal 2014. Excluding the expected negative effect of foreign currency, Gap anticipates operating margin to expand in fiscal 2014. Further, it forecasts inventories to advance by 7% at the end of the first quarter of fiscal 2014.
Moreover, the company continues to deliver on its strategic priorities with the opening of its first Gap store in Taiwan. The company also retained its target of opening over 100 Gap stores in the Greater China region through the end of fiscal 2014.
Although Gap had the inclement weather arising from the polar vortex to blame for its dismal sales results, there were other retailers which posted better results despite the weather conditions. The polar vortex that hit most parts of the U.S. in January and continued into February prevented shoppers from stepping out of their homes and ultimately knocked down the business of retailers.
However, some others including Costco Wholesale Corp. (COST), Zumiez Inc. (ZUMZ) and L Brands Inc. (LB) emerged winners gaining from the improved weather in late February, which coincided with the government’s tax refunds that boosted the purchasing power of consumers. Comps for the above mentioned companies rose 2% each for the 4 weeks ended Mar 1, 2014.
Gap currently carries a Zacks Rank #3 (Hold) and is scheduled to release its sales results for Mar 2013 on Apr 10, 2014.
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