Gap said after the market closed on Thursday that last month's net sales across all of its brands were flat compared to sales of $1.23 billion last year.
The San Francisco-based retail company said that comparable sales declined 2% in August, compared to consensus expectations of a 1.6% gain. Its flagship brand saw a 6% decline in same-store sales compared to a 2% gain in the same month last year. Banana Republic's comps also declined 2% compared to a 2% gain last year, while its Old Navy brand reported a 2% comp gain, but was lower than the 3.4% expected.
Gap specifically noted in a press release that its August sales performance "will likely put pressure on the brand's gross margins in September 2014."
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Shares were falling 4.4% to $44.52 at last check. Here's what analysts are saying on Friday about Gap.
Laura Champine, Canaccord Genuity (Buy: $50 PT)
GPS reported a 2% SSS decline on top of +2% in August, below our +2.8% estimate and consensus of +2%. Old Navy global turned in its fifth consecutive month of SSS gains, but it wasn't enough to offset weakness at Gap global. SSS declined 6% on top of +2% at the namesake brand, which has inflated inventory levels heading into the more important month of September (historically accounts for around 37% of total Q3 sales vs. August at 31%). We are now modeling for 50bps of gross margin pressure in Q3, versus our prior flat forecast, as the Gap brand clears out the excess inventory. We expect GPS's omni-channel and supply-chain initiatives will revive gross margin from F2015-F2018, driving average annual yr./yr. increases of 27bps over that span. We continue to like the long-term opportunity here, especially with shares trading at 13x our C2015 EPS estimate and 7x C2015E EV/EBITDA based on the after-hours price of $44.