Gap, Inc. (GPS) Misses Q3 EPS by 7c, Revenue Beats, Offers Outlook

Gap, Inc. (NYSE: GPS) reported Q3 EPS of $0.25, $0.07 worse than the analyst estimate of $0.32. Revenue for the quarter came in at $4 billion versus the consensus estimate of $3.82 billion.

• Gap Inc. third quarter results reflected flat sales versus last year, supported by 5% growth in comparable sales which was driven by a 61% increase in online sales.

2020 Financial Outlook:

Recognizing the continued high level of uncertainty in the marketplace, the company is not providing a fiscal year earnings outlook. The widely-noted recent rise in COVID-19 cases remains a concern, which may impact store traffic. However, with rapidly growing online sales contribution, at over 40% of company sales in the quarter, and the opportunity for market share gains, supported by the significant investment in marketing, the company remains optimistic for the fourth quarter.

Behind the continued investment in digital capabilities, including the third quarter launch of its loyalty program, the company believes it is well-positioned heading into the holiday shopping season.

General assumptions for the fourth quarter include:

Net sales being equal to or slightly higher than last year
Gross margin rate being equal to last year, reflecting continued benefits of store closures largely offset by higher shipping expenses
Operating expenses being between 33% to 34% of company sales, reflecting the company’s continued investment in brand marketing, behind the opportunity to capture market share, as well as the continued cost of in-store health & safety measures on behalf of our customers and employees.

“We’re really pleased to see key elements of our Power Plan 2023 strategy driving results in the third quarter, reflected in improving sales and gross margin trends, following the COVID-19-related store closures earlier in the year,” said Katrina O’Connell, Chief Financial Officer, Gap Inc. “Importantly, our strong cash flow continues to provide us ample liquidity to invest in marketing support behind our brands, as well as digital capabilities to drive our rapidly growing online business.”

For earnings history and earnings-related data on Gap, Inc. (GPS) click here.

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