Finance General News

Gap reduces forecasted profit resulting in an 11 percent drop in shares

Gap inc profit

Date: 31st May 2019

Gap Inc. reduced its forecasted profit figure for this year as its store sales experience the biggest drop in three years. The decline in store sales shows the brand’s tough battle with other fashion retailers and the continuously changing customer preferences.

Following the announcement of the changed forecasted profit, the shares of the company declined by 11 percent on Thursday.

Art Peck, the CEO of Gap, explained the reasons behind the quarter being a rough one for the company. He said among others lower tax refunds and late spring holidays were some of the reasons for the decline in the performance of the brand.

Another reason for the poor performance was unexpectedly colder weather in the United States in the first few months of the year. Gap produces clothing which is suitable for rather warmer weather conditions. Many other US fashion retailers faced a similar problem in the first quarter of the year.

While Gap CEO explained various reasons behind the performance decline, some analysts claim that it was rather due to the lack of in-fashion clothing that was causing it.

Managing director of GlobalData Retail, Neil Saunders said that while Gap promises every quarter to bring a better range of products, it ends up supplying the old and undifferentiated clothing items. He added that the clothing product designs have not changed much for the last 20 years.

Analysts had estimated the decline in sales of established stores of Gap to be 4 percent. However, Gap reported a decline of 10 percent in a three month period ending on May 4.

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