Gap Replaces Old Navy Leader, Cuts First-Quarter Guidance

The retailer, known for brands Gap, Old Navy and Banana Republic, lowered its first quarter net sales growth guidance, citing macroeconomic dynamics as well as execution challenges at the Old Navy brand. It now forecasts low to midteens year-over-year declines compared with its previous guidance of mid to high single digit declines compared with last year, which was boosted by stimulus spending.

The company said it would provide updated fiscal 2022 guidance when it reports its first quarter results on May 26.

Shares fell 11% in after-hours after ending Thursday at $14.29, down 0.6%. Through the close, shares have plummeted 56% over the past 12 months.

The San Francisco-based retailer also said it has decided they need to increase promotions at Old Navy.

In March, Ms. Syngal said that the company expected a more promotional environment than a year ago, when stimulus checks left shoppers flush with cash. With high inflation, she said that Old Navy could benefit from shoppers trading down for lower-priced apparel.

Gap has been working to adjust Old Navy’s strategy in recent months. In March, Chief Financial Officer Katrina O’Connell said the brand is adjusting its category mix in the second quarter to be more balanced between “cozy and fashion.” She added that the brand has capabilities that allows it to chase into fashion trends but supply-chain bottlenecks have hampered those efforts.

Earlier in the pandemic, Gap said its brands were unable to meet strong demand from shoppers due pandemic-related factory closures and clogged ports.

Write to Denny Jacob at [email protected]