Gap Inc. posted fourth-quarter gains across several metrics, maintaining its turnaround momentum.
The San Francisco-based specialty retailer reported fourth-quarter net income of $206 million, or diluted earnings per share of 54 cents, compared to net income of $185 million, or 50 cents per diluted share, in the year-ago period.
Operating income in the quarter ended Feb. 1 was $259 million, versus $214 million in the year-ago period.
Comparable sales, driven by strong shopper response to denim and active categories, rose 3 percent, marking the retailer’s fourth straight quarter of comp gains.
Net sales of $4.1 billion were down 3 percent compared to last year. But fiscal 2024 results are based on a 52-week year, whereas fiscal 2023 had 53 weeks. There was 7 percentage points of negative impact from the weekly calendar shifts so excluding the extra week of a year ago, net sales for the fourth quarter of 2024 were up 4 percent.
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Investors were very impressed with the results, pushing the stock up 16.3 percent or, $3.18, to $22.66 in after-market trading.
“We are extremely proud of the progress we are making in driving sales and market share gains, and we are making really good progress on our gross margins with better product and inventory management and great progress on reducing expenses,” Richard Dickson, president and chief executive officer of Gap Inc., told WWD.
Dickson said expenses were down $100 million year-over-year, which he attributed to “real rigor in the details of expenses and continuing to find efficiencies.”
Dickson added that the company was very pleased with holiday results, which he said exceeded financial expectations. “All four brands gained market share which really demonstrates the strength we are building with the consumer and the industry.” He said Gap Inc. has gained market share for eight consecutive quarters.
“We are excited about 2025,” Dickson said, adding that the company is determined to continue to innovate to sustain its momentum.
He did say that the first quarter of 2025 “started slowly” with the weather very cold in February. “As the weather normalized, we started seeing better trends.” He cited soft fabrications and ultra soft jeans, as well as pastels trending well, and that he anticipates “a great spring for dresses,” including recent initiatives to bolster the category at Old Navy.
There’s been widespread industry concerns as consumer confidence has been dropping this year and that Americans are inclined to pull back on their spending due to the nation’s persistent inflation and high living costs. Asked to comment on the consumer mindset, Dickson said, “We are always studying the consumer. We saw growth across all income cohort groups in the fourth quarter, with market gains in lower-income groups shopping Old Navy, and ‘outsized’ share gains at Gap, led by Gap’s top- and middle-income cohorts. Our portfolio brands appeal to a wide range of consumers. That’s a distinct advantage,” Dickson said.
In other fourth-quarter results, store sales decreased 4 percent and online sales decreased 2 percent compared to last year, both inclusive of the negative impact related to operating with one less week. Online sales represented 41 percent of total net sales.
By division, Old Navy’s fourth-quarter net sales of $2.2 billion were down 3 percent compared to last year; comparable sales rose 3 percent. “The brand continues to win in key categories, like active and denim, with innovation and newness driving strength and market share gains,” Gap Inc. indicated.
Gap brand’s fourth-quarter net sales of $980 million were down 3 percent compared to last year; comparable sales rose 7 percent. “Gap is executing the brand reinvigoration playbook with excellence, driving increased relevance and revenue,” the company indicated.
Banana Republic’s fourth-quarter net sales of $545 million were down 4 percent compared to last year; comparable sales rose 4 percent. “The brand saw notable improvement in its women’s business during the quarter and continues to build on its strength in men’s,” Gap Inc. reported.
Athleta’s fourth-quarter net sales of $396 million were down 5 percent compared to last year; comparable sales were down 2 percent. “Athleta maintained market share in the quarter, but there is still work to do to improve the brand’s execution in order to position it to regain momentum,” the company noted. While more fashionable pieces have been selling, Dickson said there’s been a lack of exciting core product.
Gross margin of 38.9 percent was flat versus last year. Merchandise margin increased 20 basis points versus last year.
“We ended the year delivering another successful quarter, exceeding financial expectations and gaining market share for the eighth consecutive quarter,” Dickson said in his prepared statement.
“For the full year 2024, Gap Inc. delivered positive comps in all four quarters, achieved one of the highest gross margins in the last 20 years and meaningfully increased operating margin versus the prior year. These strong results are underpinned by the momentum we’re seeing in our operational execution, our culture and the reinvigoration of our brands as they climb in the cultural conversation,” Dickson said.
“Looking ahead, 2025 represents an exciting step in our ongoing transformation as we continue to drive toward becoming a high performing house of iconic American brands that delivers long-term value for our shareholders.”
For all of 2024, net sales of $15.1 billion were up 1 percent compared to the prior year, inclusive of about 1 percentage point of negative impact from the loss of the 53rd week. Excluding this impact, net sales grew 2 percent year-over-year. Comparable sales were up 3 percent.
By division, Old Navy’s full-year net sales of $8.4 billion were up 2 percent versus last year; comparable sales rose 3 percent.
Gap’s full-year net sales of $3.3 billion were flat versus last year; comparable sales rose 4 percent.
Banana Republic’s full-year net sales of $1.9 billion were flat versus last year; comparable sales were up 1 percent.
Athleta’s full-year net sales of $1.4 billion were down 1 percent versus last year; comparable sales were flat.
