Gap battles strong dollar as Q1 proves weak, but Old Navy wins through

Gap Inc joined the long list of disgruntled US retailers Monday feeling the effects of the sturdy dollar on its international sales during Q1, although even with currency effects stripped out, sales are still nothing to shout about.

Once again its signature Gap brand and Banana Republic continue to trade in the shadow of its powerhouse brand Old Navy, that Gap said continued “building on its track record of three consecutive years of growth.” Elsewhere, the results were choppy at best.

Gap also announced late Monday, a full four days after those sector peers who still bother to report monthly comp sales, its April sales results as well as Q1.

Total sales for the quarter fell 3% to $3.66bn, failing to match analysts’ $3.76bn expectations, with the strong dollar pushing overseas sales down by $90m – the weakness of the yen and the Canadian dollar being the prim culprits. However, currency-neutral sales were still down 1%.

Overall comp sales made worse reading, down 4% overall for the quarter, including a 10% dive at Gap, an 8% dip at Banana Republic, but a respectable 3% increase at Old Navy.

And for April, things also looked pretty bleak, albeit compared to the year-ago figures that included a boost because Easter has shifted into April from March back in 2013. That translated into total comps this year down 12% (versus a 9% rise in 2014) including a 15% dip for Gap and 6% declines for both Banana Republic and Old Navy.

Apart from the upbeat comments on the Old Navy’s Q1 performance, there was little else for CFO Sabrina Simmons to say, other than: “We remain focused on driving improved performance across our other divisions.”

Hence, Gap’s share price was dormant after hours following the results announcement.

Gap, which delivers its full Q1 profit figures on May 21, and its May comps on June 4, now expects earnings of 55-56 cents per share with a 2-cent benefit tied to tax matters. Analysts anticipated 54 cents.

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