Gap Inc, the popular apparel retailer headquartered in San Francisco, is optimistic about its future sales growth as it anticipates the distribution of vaccines to boost traffic at its Old Navy and Athleta stores. This projection led to a 2% increase in the company’s shares, following the announcement that its fourth-quarter profit exceeded Wall Street expectations.

Due to the ongoing restrictions imposed by the coronavirus pandemic, there has been a decline in demand for Gap jeans and Banana Republic’s floral shirts. However, consumers staying at home have shown a preference for Old Navy’s affordable clothing and Athleta’s comfortable womenswear.

In the fourth quarter, Old Navy experienced a 5% increase in sales, while sales at Athleta surged by an impressive 29%. To build on this success, Gap Inc plans to open 30 to 40 new Old Navy stores and 20 to 30 new Athleta stores globally in fiscal 2021. However, as part of their strategy, they will also be closing approximately 100 Gap and Banana Republic stores.

Recognizing the growing trend of online shopping, Gap Inc has invested $140 million to strengthen its network of distribution centers. While the company expects the first half of 2021 to continue being impacted by the pandemic, it anticipates a return to pre-pandemic sales levels in the second half of the year.

For fiscal year 2021, Gap Inc forecasts mid- to high-teens growth in net sales and expects earnings per share to be in the range of $1.20 to $1.35. In the fourth quarter, the company earned 28 cents per share, surpassing expectations by 10 cents according to IBES data from Refinitiv. However, net sales for the quarter experienced a slight decline of approximately 5% to $4.42 billion, falling short of estimates of $4.66 billion. This decline can be attributed to weaknesses in the Gap brand and Banana Republic.

Despite these challenges, Gap Inc remains confident in its future growth potential, largely due to the success of Old Navy and Athleta. By capitalizing on the changing preferences of consumers and investing in its online presence, the company aims to regain its position as a leader in the apparel industry. With the roll-out of vaccines and an expected return to a more normalized sales environment, Gap Inc is well-positioned for a strong recovery in the coming year.

Useful links:
1. Gap Inc Official Website
2. Athleta Official Website