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March 14, 2023: Gap Inc. reported weak sales and earnings for Q4 2022, with a decline in net sales of 6% to $4.24 billion and comparable sales down 5%. The company’s struggles are attributed to a continuation of softness in demand and poor merchandising planning that has plagued the company throughout the year. The holiday selling season was challenging for all retailers, but Gap’s weak results highlight its need for strong merchant leadership.
To address the company’s performance, Bob Martin, Executive Chairman and interim CEO, announced several management changes. Among them, Mary Beth Laughton, President and CEO of Athleta, has left the company, and Sheila Peters, Chief People Officer for Gap, Inc., will leave at the end of the year. The role of the Chief Growth Officer has also been eliminated. Gap plans to hire a new CEO and brand chief shortly.
In addition to management changes, Gap plans to streamline its operating model, resulting in fewer management layers and more consistent organizational structures across all four brands. The company also intends to optimize its marketing efforts and rationalize technology investments to achieve additional savings.
Several factors contributed to the weak results, including general demand softness and a shutdown of Veezy Gap, negatively impacting growth by 2%. Banana Republic’s weakness was driven by weak sales in outerwear and sweaters. The company’s online sales decreased by 10% but still represented 41% of total net sales, down from 44% last year.
For the full year, Gap reported net sales of $15.6 billion, a decline of 6%, and comparable sales were down 7%. Online orders decreased by 7%, and the company reported an operating loss of $69 million. Gap reported an adjusted diluted loss per share of $0.40, excluding impairment charges related to inventory, costs related to the Old Navy Mexico transition, and gain on the sale of a distribution centre in the U.K.
In conclusion, Gap’s weak results highlight the company’s need for strong merchandising leadership and a vision to create new excitement. The company plans to implement strategies to streamline its operating model, optimize marketing efforts, and rationalize technology investments to achieve additional savings. With a new CEO and brand chief joining the company soon, Gap hopes to turn its fortunes around and regain market share.
