TLDR
- Gap stock rose 18.6% after beating Q4 revenue and EPS expectations
- Full-year operating profit growth guidance of 8-10% exceeded market expectations
- Comparable sales increased 3% year-over-year with Gap Global comps up 7%
- The company has gained market share for eight consecutive quarters
- Gap announced a 10% dividend increase to 16.50 cents per share
Gap Inc. (GAP) stock jumped 18.6% to close at $23.12 after the clothing retailer posted fourth-quarter fiscal 2024 results that exceeded analysts’ expectations. The company reported earnings per share of 54 cents, surpassing the estimate of 36 cents and representing a 10% increase from the previous year.
The strong performance sent shares rocketing higher in both pre-market and regular trading sessions. The dramatic price movement reflects investors’ positive reaction to the company’s financial results and optimistic outlook.
Gap’s net sales reached $4.15 billion for the quarter, beating the consensus estimate of $4.07 billion. This came despite a 3% year-over-year decline, which included nearly seven percentage points of adverse impacts from calendar shifts and the loss of the 53rd week.
Comparable sales, a key retail metric, rose 3% compared to the same period last year. This growth indicates the retailer’s ability to attract customers and generate higher sales from existing stores.
Online sales decreased 2% year-over-year but still accounted for 41% of total sales. Store sales fell 4% compared to the previous year. Both figures were affected by the loss of the additional week in the quarter.
Gap Global, one of the company’s core brands, reported a 2.7% decrease in net sales to $980 million. However, the brand achieved a 7% increase in comparable sales, marking its fifth consecutive quarter of positive comps.
Old Navy, the company’s largest brand, saw net sales edge down 4.3% to $2.2 billion. Comparable sales for Old Navy rose 3%, driven by strong performance in key categories like active wear and denim.
Banana Republic experienced a 3.9% drop in net sales to $545 million, while comparable sales increased by 4%. The brand has been undergoing repositioning efforts within Gap’s portfolio.
Athleta, the company’s athletic wear brand, reported a 5.5% decrease in net sales to $396 million. Comparable sales for Athleta declined 2%, reflecting ongoing challenges as the company works to reset the brand.
Gap’s gross margin remained flat year-over-year at 38.9%. The merchandise margin grew by 20 basis points due to inventory management improvements. Operating margin expanded to 6.2%, growing 120 basis points from the previous year’s adjusted figure.
The company’s financial position remained strong
The company’s financial position remained strong with $2.3 billion in cash and cash equivalents, up 21.1% from the year-ago period. Gap generated $1.5 billion in cash from operating activities and had a free cash flow of $1 billion for the fiscal year.
In a move that signals confidence in its financial outlook, Gap announced a 10% increase in its quarterly dividend to 16.50 cents per share from the previous 15 cents. This hike demonstrates the company’s commitment to returning value to shareholders.
Gap projects sales growth of 1-2% in 2025
For fiscal 2025, Gap projects sales growth of 1-2% from the $15.1 billion recorded in fiscal 2024. This forecast includes an expected 30 basis points of adverse impacts from foreign currency due to a stronger U.S. dollar.
The company expects operating income to rise 8-10% from the prior year’s figure of $1.11 billion. This optimistic guidance reflects management’s confidence in continued operational improvements and brand strength.
Gap continues to streamline its store portfolio as part of its optimization strategy. As of February 1, 2025, the company operated 3,569 stores in approximately 40 countries. Net store closures for fiscal 2025 are expected to be about 35, with most of them at Banana Republic.
Management highlighted the company’s market share gains, noting that this was the eighth straight quarter of increasing market share. This consistent trend reinforces Gap’s position as a leading specialty apparel retailer.
For the first quarter of fiscal 2025, Gap forecasts net sales to be flat to slightly up from the $3.4 billion seen in the same quarter last year. The gross margin is predicted to rise slightly from the 41.2% recorded in the prior-year period.
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