Gap Inc. (GAP) reported its second-quarter results after the bell on Thursday, and while the top line came in a bit light, the bottom line told a better story. Investors seemed to like what they saw, sending shares up sharply in after-hours trading.
Here's a quick look at the numbers:
- Q2 Revenue: $3.65 billion, versus estimates of $3.69 billion
- Q2 Adjusted EPS: 52 cents, versus estimates of 48 cents
Net sales slipped 2% year-over-year, with store sales down 3% and online sales down 1%. Online still accounted for 35% of total net sales. Comparable sales overall were down 1%, but the brand breakdown is where things get interesting.
- Old Navy: down 4%
- Gap: up 10%
- Banana Republic: up 3%
- Athleta: down 12%
CEO Richard Dickson struck a balanced tone in the earnings release: "While top-line results in the second quarter were modestly below expectations, continued operational and financial rigor contributed to gross margin strength resulting in the company exceeding profit expectations."
He also highlighted the bright spot: "We are particularly proud of the momentum at the Gap brand, which posted another quarter of double-digit comparable sales. We have work to do at Old Navy, but we have a clear understanding of the factors that impacted performance and are taking targeted actions that are already driving improved results."
Speaking of Old Navy, the company announced a leadership change. Michael Francis will step in as president and CEO of Old Navy, while Haio Barbeito transitions to an advisory role. It's a clear signal that Gap is serious about fixing the struggling brand.
Looking ahead, Gap expects third-quarter revenue of approximately $3.96 billion to $4 billion, compared to estimates of $3.98 billion. For the full year, the company guided revenue of $15.55 billion to $15.63 billion, versus estimates of $15.53 billion.
More importantly, Gap raised its full-year adjusted earnings guidance from $2.30-$2.40 per share to $2.35-$2.45 per share, above the $2.34 analysts were looking for.
Management will discuss the quarter in more detail on an earnings call at 5 p.m. ET.
As for the market reaction, Gap shares were up 11.45% in Thursday's after-hours session, trading at $23.17 at publication time.
