**Gap Inc. sales fell short of expectations in its most recent quarter, underscoring the challenges facing new CEO Sonia Syngal as she tries to revive the struggling retailer.**
The company reported on Thursday that net sales for the three months ended August 3, 2023, totaled $4.04 billion, down 3% from $4.17 billion in the prior-year period. Comparable sales, a key metric for retailers, declined by 1% during the quarter.
The results missed analysts’ estimates, who had forecast sales of $4.08 billion and a comparable sales increase of 0.3%, according to Refinitiv IBES data.
Gap’s challenges are well-known. The company has been losing market share to fast-fashion rivals such as H&M and Zara, and its core Gap brand has struggled to resonate with younger consumers. Syngal, who took over as CEO in February, has vowed to revitalize the brand and improve its profitability.
However, the company’s latest results suggest that it will take time for Syngal’s turnaround plan to bear fruit. Gap’s gross margin fell by 1.2 percentage points to 38.7% during the quarter, hurt by higher input costs and markdowns. The company also saw an increase in expenses, including a $45 million charge related to its Old Navy business.
As a result of the disappointing results, Gap lowered its full-year guidance. The company now expects net sales to be flat to down 2% in fiscal 2023, compared with its previous forecast of a 2% to 3% increase. Comparable sales are now expected to be flat to down 2%, compared with a previous forecast of a 1% to 2% increase.
Gap’s stock price fell by more than 10% in premarket trading on Thursday following the release of the results.
Despite the challenges, Syngal said that she remains confident in the company’s long-term prospects.
.
