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Gap Inc. Swings Into the Black for Q4, CEO Richard Dickson Says Retailer Is ‘Building Muscle’

Gap Inc., showing some positive signs of life at Gap and Old Navy, swung into the black during the fourth quarter.

Net income for the fourth quarter ended Feb. 3 reached $185 million, or 50 cents per diluted share, compared to a loss of $273 million, or 75 cents per share in the year-ago quarter.

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Operating income reached $214 million in the fourth quarter compared to an operating loss of $30 million in the year-ago period. The operating margin was 5 percent.


Net sales rose 1 percent to $4.3 billion last quarter from $4.24 billion in the year-ago quarter. Comparable sales were flat. Sales were impacted negatively by the sale of Gap China, but impacted positively by the fiscal year’s 53rd week.

Store sales increased 4 percent while online sales decreased 2 percent. Online represents 40 percent of total sales.

“We are actually very pleased with the results. We exceeded expectations on the top and bottom lines,” Richard Dickson, Gap Inc. president and chief executive officer, told WWD. “There were market share gains, with strength at Old Navy and Gap. Our operational and financial rigor is really showing in the numbers.

“We started the year with leaner inventories, which are down 16 percent versus last year,” Dickson added. “We expanded our gross margin by 530 basis points, increased our operating margin by 570 points. We are running a more disciplined operative business, enabling us to concentrate on reinvigorating our brands.”

Dickson also said the corporation ended the year with nearly $2 billion in cash, a 54 percent increase from last year.

Asked if the bottom-line improvement stemmed from any significant changes taken last year that didn’t happen this year, Dickson replied, “This is purely performance-based. We have been making concerted efforts around financial and operational disciplines, and those are truly showing up on the scorecard. We are building muscle to focus our energy on reinvigorating our brands.”

Asked about bestsellers, Dickson put linen at the top of his list. Late last month, Gap brand launched its “Linen Moves” campaign starring South African singer Tyla, which Dickson said is “a great example of our playbook in action. We are very pleased so far with early reads. Traffic to our sites has been stellar. We struck a cultural chord with this campaign on Instagram and TikTok. On both platforms, it was our highest performing video in Gap’s history.”

Dickson’s playbook involves giving each Gap Inc. brand a stronger identity, leveraging music and pop culture to drive relevance and fashion, and working to champion original, trend-right products.

Other bestsellers so far this season, according to Dickson, include wide-leg bottoms, cargo pants, denim, Western styles, and items in more forward colors such as pink, pale blue and pale yellow.

“We believe we are experiencing a good start to the (first) quarter,” Dickson said.

Richard Dickson
Richard Dickson

Dickson said after a volatile 2023 marked by uncertainty among consumers, dwindling savings and inflation, “the good news is that we avoided a recession.” For 2024, Dickson said “the apparel market is expected to decline, but there are always winners in any market. Where there is innovative market and newness, you are seeing consumers respond.”

The company projects that sales for 2024 will be roughly flat against the $14.9 billion in sales generated in 2023. While some gains could be seen at Gap and Old Navy, those would be somewhat offset by Banana Republic and Athleta. Gap Inc. officials are taking “a measured view” on the consumer environment.

For the first quarter of this year, the company projects sales will be roughly flat to last year’s $3.3 billion.

When Gap Inc. released its fourth-quarter results on Thursday after the market closed, the stock price immediately jumped 10 percent, but about two hours later settled in with a 3.5 percent gain, or 67 cents, to $20.

For the full year, Gap Inc. reported net income of $502 million versus a loss of $202 million in 2023. Net sales were $14.9 billion, down 5 percent from 2022. Comparable sales were down 2 percent. Store sales declined 3 percent; online sales decreased 7 percent.

Operating income was $560 million. The operating margin was 3.8 percent. Adjusted operating income, excluding $93 million in restructuring costs and a $47 million gain on a sale, was $606 million. The adjusted operating margin was 4.1 percent.

By division, Old Navy’s fourth-quarter net sales rose 6 percent to $2.29 billion; comparable sales were up 2 percent. In 2023, Old Navy posted net sales flat at $8.2 billion and down 1 percent on a comp basis.

Gap’s fourth-quarter net sales slipped 5 percent to $1.01 billion, but comp sales rose 4 percent. Full-year net sales of $3.3 billion were down 11 percent versus last year; comp sales rose 1 percent.

Banana Republic’s fourth-quarter net sales of $567 million were down 2 percent compared to last year; comparable sales were down 4 percent. “While the brand has been making progress elevating its aesthetic, re-establishing Banana Republic will take time and there is work to be done to better execute many of the fundamentals,” the company said in a statement.

Athleta reported fourth-quarter net sales of $419 million, which were down 4 percent compared to last year; comparable sales were down 10 percent. “Athleta’s performance improved sequentially versus the prior quarter, but sales continue to be challenged due to tougher comparisons as the brand laps a period of elevated discounting last year,” the company indicated. For the year, net sales of $1.4 billion were down 8 percent versus last year; comparable sales fell 12 percent.

In his prepared statement, Dickson said, “The fourth quarter exceeded expectations on several key metrics along with market share gains, reflecting improved trends at Old Navy and Gap and strong continued progress on margins and cash flow.

“The financial and operational rigor we have worked to develop, and will continue to pursue, is enabling us to focus on reinvigorating our brands with the goal of generating profitable growth and value for shareholders. While there is a lot of work to do, I am inspired by the team’s commitment and energized by the opportunities ahead.”

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