Thursday, April 7, 2016

GAP'S SALES DROP IN MARCH WHILE INVENTORIES ARE HIGH

How much of the Gap's sales and inventory problems reflect their omnichannel strategy and need for the New Supply Chain?




Gap Reports Drop in March Sales, High Inventory Levels

Sales at stores open at least a year fell 6% in the five weeks ended April 2


At Gap Inc.’s different brands, the biggest sales decline for the five weeks ended April 2 came from Banana Republic, which reported a 14% drop in same-store sales. ENLARGE
At Gap Inc.’s different brands, the biggest sales decline for the five weeks ended April 2 came from Banana Republic, which reported a 14% drop in same-store sales. Photo: Bloomberg News
Gap Inc.’s woes continue to mount, as the struggling apparel retailer warned that weak sales in March have left it with too many unsold goods that will squeeze profits.
The company on Thursday said sales at stores open at least a year fell 6% in the five weeks ended April 2, and it is entering April with more inventory than anticipated. The excess merchandise is expected to “pressure its gross margin rate” for the first quarter of the fiscal year, the retailer said.
The company released the news after markets closed. Shares, which fell 4% to $27.69 in 4 p.m. trading, fell as much as 10% in late trading. The stock has fallen about 35% over the past 12 months.
Gap has been trying to reinvigorate its namesake brand. The company brought back former Banana Republic veteran Wendi Goldman last year to help with product design. As part of cost-cutting measures, the company has also slashed its workforce and closed dozens of stores.
“While March proved challenging, we remain focused on taking the necessary steps to improve results across the portfolio throughout the year,” the company’s finance chief, Sabrina Simmons, said in a news release.
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Analysts have cautioned that the company’s main brands, Gap and Banana Republic, have lost relevance with younger shoppers. The company is also being squeezed by fast-fashion retailers such as H&M and a shift to online shopping.
Gap said it generated revenue of $1.43 billion in the five weeks ended April 2, compared with $1.53 billion in the same period a year earlier. Comparable sales declined 3% at the Gap brand, 14% at Banana Republic and 6% at Old Navy.
Write to Khadeeja Safdar at khadeeja.safdar@wsj.com