(Reuters) -Gap on Thursday forecast holiday-quarter sales below estimates, but posted better-than-expected results for the third quarter thanks to easing supply expenses and cost-control efforts, sending its shares up 11% in extended trading.
The once sought-after apparel maker has seen falling sales at all four of its major brands this year as sticky inflation forced lower-income customers to tighten spending, while other shoppers turned to rivals such as Shein and Amazon.com for fresher styles.
Gap expects fourth-quarter net sales to be flat to slightly negative, compared with analysts’ expectations for a 0.33% rise, according to LSEG data.
Banana Republic and Athleta’s sales fell 11% and 18% in the third quarter, while Old Navy, Gap’s biggest brand, recorded a 1% decline.
Still, the apparel maker’s efforts to keep inventory levels under control and take fewer markdowns helped it post a 460 basis point increase in merchandise margins.
Gap’s ending inventory of $2.38 billion for the third quarter was 22% lower than in 2022.
Over the last year, the company has also eliminated jobs and shut down underperforming Gap and Banana Republic stores to help control expenses.
That, along with the easing of supply-chain costs related to freight and manufacturing, helped it post an adjusted profit of 59 cents per share, crushing estimates of 19 cents, while net sales of $3.78 billion also beat expectations of $3.60 billion.
The company also said it continues to expect fiscal 2023 net sales to decline in the mid-single-digit range.
(Reporting by Ananya Mariam Rajesh in Bengaluru; Editing by Devika Syamnath)
