Gap Inc, one of the largest apparel companies of the US, has reported a slump in its sales in its second quarter (Q2) of fiscal 2022 (FY22) ended July 30, 2022, media reported.
According to the media reports, the net sales of GAP plunged 8% to $3.86 billion, while online sales declined by 6% compared to last year.
The company’s comparable sales were also dip by 10% year-over-year.
Moreover, store sales declined 10% compared to last year.
The company ended the quarter with 3,390 store locations in over 40 countries, of which 2,799 were company operated.
Reported gross margin was 34.5%; adjusted gross margin, excluding a $58 million charge related to the impairment of unproductive inventory, was 36%, deleveraging 730 basis points versus last year, media reported.
According to the reports, merchandise margins were down 850 basis points versus last year; adjusted for the inventory impairment, merchandise margins declined 700 basis points.
Merchandise margins were negatively impacted by an estimated $50 million, or 130 basis points, of incremental transitory air freight costs, and the remaining decline of approximately 570 basis points was driven by higher discounting, primarily at Old Navy, and inflationary commodity price increases.
The declines were partially offset by the benefit of lower discounting at Banana Republic.
Gap’s reported operating loss was $28 million in the quarter and reported operating margin was 0.7%, while adjusted operating income was $65 million and adjusted operating margin of 1.7%.
Reported net loss of the company was $49 million and adjusted net income was $30 million, which excludes the inventory impairment and Old Navy Mexico charge.
Gap ended the quarter with cash and cash equivalents of $708 million and its net cash from operating activities was negative $207 million.
Ending inventory of $3.1 billion was up 37% year-over-year which includes nearly 10 percentage points of pack and hold inventory and 7 percentage points of in-transit.
Gap’s year-to-date capital expenditures were $406 million and share repurchases were $57 million, representing 5.7 million shares.