Gap Inc.'s fiscal second quarter profits fell 43%, dragged down by costs related to store closings and the restructuring of its business.
The beleaguered San Francisco-based chain also reported comparable sales declines at its three top brands, including at Old Navy, once a bright spot.
The downbeat performance announced Thursday comes six months after the retailer said it was creating two independent publicly traded companies — low-priced Old Navy and a yet-to-be named company that will hold the iconic Gap brand and Banana Republic, as well as the lesser known names Athleta, Intermix and Hill City.
FILE - This Aug. 31, 2017, file photo shows a sign for a Gap store in Pittsburgh. The Gap Inc. reports financial results Thursday, Aug. 22. (AP PhotoGene J. Puskar, File)
Gap Inc. has said the spin-off will enable each of the two companies to focus on flexibility and pare down costs.
"We are operating in a challenging environment, but I remain confident in the strength of our brands and our plans for the future as we work to launch two independent, public companies," said Art Peck, the company's president and chief executive officer.
Like many mall-based clothing chains, Gap is struggling to turn itself around as shoppers go online or to discounters like T.J. Maxx for their clothing. But Gap, which defined casual dressing in the 1990s, has also long struggled with its own deep-rooted problems — its offerings have failed stand out from that of its rivals.
The chain has been promising investors that a turnaround is in the making. Instead, it keeps having to discount its merchandise to get customers into its stores. Now, it's turning to new ways to grab customers. Earlier this month, its Banana Republic division, following other clothing competitors, announced it was launching an online subscription service.
But the latest results show Gap has a long way to go.
"Gap is a company in retreat," said Neil Saunders, managing director at GlobalData Retail. "Its profits and sales are in decline and it doesn't seem to have many credible plans to reverse that position."
Gap reported net income of $168 million, or 44 cents per share. Earnings, adjusted for pretax expenses and non-recurring costs, were 63 cents per share.
The results surpassed Wall Street expectations. The average estimate of 10 analysts surveyed by Zacks Investment Research was for adjusted earnings of 52 cents per share. That compares with $297 million, or 76 cents per share, in the year-ago period.
The clothing chain posted revenue of $4.01 billion in the period, down from $4.09 billion in the year-ago period. Eight analysts surveyed by Zacks expected $4.02 billion in the latest period.
Gap said that overall global sales at stores opened at least a year fell 4% during the quarter. By brand, Gap's sales at stores opened at least a year fell 7%, while Banana Republic's comparable sales were down 3%. Old Navy posted a 5% decline in comparable sales.
Gap affirmed its full-year earnings in the range of $2.05 to $2.15 per share. Gap says it still expects comparable sales to be down low-single digits for the current fiscal year.
Gap shares have decreased 31% since the beginning of the year, while the Standard & Poor's 500 index has risen 17%.
The shares fell 17 cents to $17.58 in after-hours trading, after rising nearly 5%, or 79 cents, to $17.75 in regular-session trading Thursday.
This story was generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on GPS at https://www.zacks.com/ap/GPS
WASHINGTON (AP) — A soon-to-be-released Biden administration review of Israel's use of U.S.-provided weapons in its war in Gaza does not conclude that Israel has violated the terms for their use, according to three people who have been briefed on the matter.
The report is expected to be sharply critical of Israel, even though it doesn't conclude that Israel violated terms of U.S.-Israel weapons agreements, according to one U.S. official.
The administration's findings on its close ally's conduct of the war, a first-of-its-kind assessment that was compelled by President Joe Biden's fellow Democrats in Congress, comes after seven months of airstrikes, ground fighting and aid restrictions that have claimed the lives of nearly 35,000 Palestinians, mostly women and children.
Biden has tried to walk an ever-finer line in his support of Prime Minister Benjamin Netanyahu’s war against Hamas. He has faced growing rancor at home and abroad over the soaring Palestinian death toll and the onset of famine, caused in large part by Israeli restrictions on the movement of food and aid into Gaza. Tensions have been heightened further in recent weeks by Netanyahu’s pledge to expand the Israeli military’s offensive in the crowded southern city of Rafah, despite Biden's adamant opposition.
Biden is in the closing months of a tough reelection campaign against Donald Trump. He faces demands from many Democrats that he cut the flow of offensive weapons to Israel and denunciation from Republicans who accuse him of wavering on support for Israel at its time of need.
Two U.S. officials and a third person briefed on the findings of the national security memorandum to be submitted by Secretary of State Antony Blinken to Congress discussed the findings before the report's release. They spoke on condition of anonymity because the information was not yet public.
A senior Biden administration official said the memorandum is expected to be released later Friday, but declined to comment on its conclusions.
Axios first reported on the memorandum's findings.
The Democratic administration took one of the first steps toward conditioning military aid to Israel in recent days when it paused a shipment of 3,500 bombs out of concern over Israel’s threatened offensive on Rafah, a southern city crowded with more than a million Palestinians, a senior administration official said.
The presidential directive, agreed to in February, obligated the Defense and State departments to conduct “an assessment of any credible reports or allegations that such defense articles and, as appropriate, defense services, have been used in a manner not consistent with international law, including international humanitarian law.”
The agreement also obligated them to tell Congress whether they deemed that Israel has acted to “arbitrarily to deny, restrict, or otherwise impede, directly or indirectly,” delivery of any U.S.-supported humanitarian aid into Gaza for starving civilians there.
Lawmakers and others who advocated for the review said Biden and previous American leaders have followed a double standard when enforcing U.S. laws governing how foreign militaries use U.S. support, an accusation the Biden administration denies. They had urged the administration to make a straightforward legal determination of whether there was credible evidence that specific Israeli airstrikes on schools, crowded neighborhoods, medical workers, aid convoys and other targets, and restrictions on aid shipments into Gaza, violated the laws of war and human rights.
Their opponents argued that a U.S. finding against Israel would weaken it at a time it is battling Hamas and other Iran-backed groups. Any sharply critical findings on Israel are sure to add to pressure on Biden to curb the flow of weapons and money to Israel’s military and further heighten tensions with Netanyahu’s hard-right government over its conduct of the war against Hamas.
Any finding against Israel also could endanger Biden’s support in this year's presidential elections from some voters who keenly support Israel.
At the time the White House agreed to the review, it was working to head off moves from Democratic lawmakers and independent Sen. Bernie Sanders of Vermont to start restricting shipments of weapons to Israel.
Israel launched its offensive after an Oct. 7 assault into Israel, led by Hamas, killed about 1,200 people. Two-thirds of the Palestinians killed since then have been women and children, according to local health officials. U.S. and U.N. officials say Israeli restrictions on food shipments since Oct. 7 have brought on full-fledged famine in northern Gaza.
Human rights groups long have accused Israeli security forces of committing abuses against Palestinians and have accused Israeli leaders of failing to hold those responsible to account. In January, in a case brought by South Africa, the top U.N. court ordered Israel to do all it could to prevent death, destruction and any acts of genocide in Gaza, but the panel stopped short of ordering an end to the military offensive.
Israel says it is following all U.S. and international law, that it investigates allegations of abuse by its security forces and that its campaign in Gaza is proportional to the existential threat it says is posed by Hamas.
Biden in December said “indiscriminate bombing” was costing Israel international backing. After Israeli forces targeted and killed seven aid workers from the World Central Kitchen in April, the Biden administration for the first time signaled it might cut military aid to Israel if it didn’t change its handling of the war and humanitarian aid.
Presidents Ronald Reagan and George H.W. Bush, in the 1980s and early 1990s, were the last presidents to openly hold back weapons or military financing to try to push Israel to change its actions in the region or toward Palestinians.
A report to the Biden administration by an unofficial, self-formed panel including military experts, academics and former State Department officials detailed Israeli strikes on aid convoys, journalists, hospitals, schools and refugee centers and other sites. They argued that the civilian death toll in those strikes — such as an Oct. 31 strike on an apartment building reported to have killed 106 civilians — was disproportionate to the blow against any military target.
Palestinians mourn their relatives killed in the Israeli bombardment of the Gaza Strip, at a hospital in Rafah, Gaza, Friday, May 10, 2024. (AP Photo/Ismael Abu Dayyah)
U.S. President Joe Biden boards Marine One at Moffett Airfield in Mountain View, Calif., Thursday, May 9, 2024. (Jose Carlos Fajardo/Pool Photo via AP)
