Gap shares plunge amid weak sales and stalled comeback

Gap Inc Shares Fall

Shares in Gap Inc. plunged by almost 14 percent on Friday after the apparel chain posted disappointing sales and alluded to a stalled comeback. The retailers also reported that inventory is piling up at its stores.

The San Francisco-based company reported that same-store sales fell 6 percent last month. Analysts predicted a 5 percent decline, so the actual numbers were only slightly less than what they expected. In a report, Citigroup Inc. analyst Paul Lejuez wrote, “The company did not get the traffic build it expected in the week leading up to Easter.”

Excess apparel is bad for retailers, especially entering a new season where clothing styles change and shoppers are searching for different kinds of merchandise. Bloomberg explained that Gap will have to discount this merchandise in order to clear out the excess apparel and make room for summer clothing.

Chief Executive Officer Art Peck previously reported that the struggling apparel chain will show signs of a comeback this spring. However, the latest reports and results threaten to set back its progress.

In a statement on Thursday, CFO Sabrina Simmons noted, “While March proved challenging, we remain focused on taking the necessary steps to improve results across the portfolio throughout the year.”

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The news of poor sales caused Gap’s stock to fall to $23.85 by the end of trading on Friday. The decline was Gap’s largest intraday loss in three months. It was up 12 percent for the year through Thursday’s close.

In its announcement Thursday, Gap also noted that net sales declined year-to-year for the five weeks that ended April 1ng. During that five-week period in 2015, the store made $1.53 billion. It made $1.43 billion during the same weeks this year, equalling a 15 percent loss in sales, according to CNN Money.

Roxanne Meyer, an analyst at MKM Partners LLC, noted that Gap’s decline in sales can be attributed to the chain’s struggle getting shoppers in the door. She added in a report that the company could also have a tough time weaning its customers off discounts. Meyer wrote, “Traffic could continue to be a headwind” for the company.

Gap also operates the Banana Republic and Old Navy brands.

Written by Jeff Springer

Jeff Springer

Jeff Spring is the Finance & Markets Editor at BusinessPundit.com. He's currently spending his days backpacking across Europe. While he may be living outside of the United States, he stays connected to American financial markets and M&A's more than is probably healthy for any single person. His love of a good book and a Bloomberg terminal can't be understated. He can be reached at JeffSpringer@BusinessPundit.com