As customers return to 'embrace summer,' Gap is ready to shine

28th August 2021, Mumbai:

Gap Inc upped its full-year net sales forecast for the second time on Thursday, anticipating strong demand for its Old Navy and Athleta clothing brands as flu restrictions are eased.

Gap's annual profit projection was also raised, sending shares up 7% afterwards as both forecasts topped market expectations amid a good earnings season for retailers including Macy's, Kohl's, and discounter T.J. Maxx.

On an earnings call, Gap Chief Executive Officer Sonia Syngal remarked, "Our customers embraced summer with optimism, hungry for mood-boosting clothes as trips and reunions became a reality."

Old Navy's net sales increased by 21% in the second quarter compared to pre-pandemic levels two years ago, while Athleta's increased by 35%. 75 percent of pre-orders for the Yeezy-Gap jacket came from fresh new customers, thanks to the retailer's collaboration with musician Kanye West.

The Banana Republic company has also been investing more in its digital business in order to capitalise on the rise in online shopping, and earlier today announced the acquisition of Drapr, a startup that allows shoppers to digitally try on garments.

Gap anticipates net sales growth of around 30% in fiscal 2021, compared to a previous prediction of low-to-mid 20%. According to Refinitiv statistics, analysts predicted a 24.3 percent increase. The company, which has been focusing on marketing and inclusion, expects annual adjusted earnings of $2.10 to $2.25 per share, up from $1.60 to $1.75 previously. The consensus among analysts was $1.80.

Net sales of $4.2 billion were the highest in the second quarter in almost a decade, increasing by 29% to above expectations. Gap, on the other hand, said it is investing in air freight to deal with delayed inventory deliveries caused by shipping delays and pandemic-related manufacturing closures in countries where it imports, echoing rival Abercrombie & Fitch's statements.

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