Gap Inc (NYSE:GPS) shares fell more than 16% on Thursday after the apparel retailer issued a weaker-than-expected second-quarter sales outlook and trimmed its full-year revenue forecast, despite a broadly solid first-quarter performance and continued strength in its flagship Gap…
and. The company reported first-quarter revenue of $3.5 billion, up 1% year over year but slightly below analyst estimates of $3.53 billion
Comparable sales rose 2%, missing the 3.1% consensus estimate, though gross margin of 40.5% exceeded the company’s own outlook. Adjusted earnings per share of $0.38 came in just ahead of the $0.37 estimate. The sharp share decline was driven largely by second-quarter guidance calling for net sales to be flat to down 1% year over year, well below analyst expectations of a 2.1% gain.
For the full year, Gap lowered its net sales growth forecast to 1% to 2%, from a prior outlook of 2% to 3%, while raising its adjusted EPS guidance to $2.30 to $2.40. Performance varied sharply across the company’s four brands. The Gap brand posted a 10% comparable sales gain, its tenth consecutive positive quarter, driven by strength in denim and fleece.