Gap shares were down more than 16% in trading on Wednesday after the San Francisco company posted third-quarter earnings of 25 cents a share, down from 37 cents in the year-ago quarter and below the 27 cents expected by analysts polled by FactSet.
Sales at the company's namesake stores as well as its Banana Republic, Old Navy and Athleta brands rang in at $3.99 billion, helped in part by a 61% jump in online sales, though that was offset by a 20% drop in brick-and-mortar sales, driven by consumers’ hesitancy to visit physical stores and spend money during the pandemic.
Comparable same-store sales, which typically measure sales at stores open at least one year, fell 5% at the Gap and declined 30% at Banana Republic. The measure increased 17% at Old Navy and jumped 37% at Athleta, Gap said.
The lower-than-expected earnings prompted at least one analyst to both downgrade his rating on the stock and lower his one-year price target. Citi analyst Paul Lejuez downgraded Gap to neutral from buy with a one-year price target of $27, down from $30.
Lejuez’s downgrade followed Gap CEO Sonia Syngal’s post-earnings remarks to analysts that fourth-quarter sales are likely to ring in flat or just slightly higher than last year, in large part due to ongoing pandemic-related uncertainty.
Syngal was named CEO of Gap in late March, just days after the company shuttered all of its stores in the U.S. and Canada due to the initial wave of the pandemic. Syngal is attempting to oversee a turnaround at Gap's namesake brand by closing stores, exiting malls and streamlining offerings, while also boosting the Old Navy and Athleta businesses.
Meantime, B. Riley Securities analyst Susan Anderson took the opposite tact, raising her price target on Gap to $22 from $20 on broader optimism that consumer spending is rebounding faster than expected, warranting a higher multiple on retailers in general.
Shares of Gap were down 16.64% at $22.40 in trading on Wednesday.