Gap Inc. said its comparable sales, a key gauge for retailers, fell 5% in the fourth quarter ended Jan. 28, compared with analysts’ average estimate of a 2.7% decline. Gap expects the revenue decline to continue this year.

The retail brand has been looking for a new CEO since July, when Sonia Syngal was ousted as the company struggled to manage inventory.

Gap online sales drop

Gap online sales dropped 10% in Q4 from a year earlier, chief financial officer Katrina O’Connell said in a March 9 call with investors. However, Gap online sales are up 29% compared with pre-pandemic 2019. Moreover, digital sales represented 41% of total sales in its fiscal 2022 fourth quarter.

The Gap Inc. is No. 19 in the Top 1000, Digital Commerce 360’s rankings of the largest online retailers in North America by web sales.

Brand breakdown

Comparable sales declined at all four of the company’s main brands: Gap, Banana Republic, Athleta and Old Navy. The latter has historically been a growth driver for the company but has struggled lately.

Profitability also took a hit. Gross margin was 33.6%, down from the prior quarter due to heavy discounting during the holiday season.

The Gap Q4 sales

The Gap brand’s fourth-quarter net sales declined to $1.1 billion from the year-ago quarter. That’s down 9%, whereas comparable sales dropped 4% year over year. The retailer did not break out Gap online sales.

The retailer said shutting down Yeezy Gap, the company’s partnership with rapper Ye, contributed to the sales drop in North America. Comparable sales in the region dropped 5% year over year.

Old Navy Q4 sales

Fourth-quarter net sales decreased to $2.2 billion at Old Navy. That’s down 6% year over year. Meanwhile, comparable sales decreased 7%. Gap Inc. did not share Old Navy online sales figures.

O’Connell said she believes Old Navy pulled sales forward to its fiscal third quarter last year as the retailer began its holiday promotions early in October. That affected sales growth in the retailer’s fiscal fourth quarter, she said.

Banana Republic Q4 sales

Net sales decreased to $578 million in the retailer’s fiscal fourth quarter. That’s a 6% year-over-year decrease. Comparable sales decreased 3%, the retailer said, attributing it to fewer outerwear, sweater and holiday gifting sales.

“While dresses and suiting drove comp growth in the quarter, the company remains mindful of the fact that BR has been a beneficiary of the shift in consumer preferences to occasion and work-based categories as people go back to work and events post-COVID,” Gap Inc. said in a March 9 press release.

Athleta Q4 sales

As with the other three brands, Athleta fourth-quarter sales declined. Total sales decreased 1% year over year to $436 million. Similarly, fourth-quarter comparable sales decreased 5%.

What Bloomberg Intelligence says

“Having cut inventories 21%, Gap is well positioned with fresh product — particularly at Old Navy — that’s driving Q1 trends better than Q4 at a higher gross margin (vs. Q1 2022),” said Mary Ross Gilbert, senior retail analyst. “With the biggest shopping days of the quarter still to go and weakness in lower-income cohorts, management sees Q1 and 2023 sales down.”

The San Francisco-based company announced several executive changes in its earnings report, with the CEO of the Athleta brand departing and the position of chief growth officer eliminated. These changes, in addition to an effort to “optimize” the organizational structure, are expected to result in $300 million in annualized savings, Gap said.

Gap earnings summary

For the fiscal fourth quarter ended Jan. 28, Gap reported:

• Net sales of $4.24 billion, down 6% compared with the year-ago period.
• Comparable sales dropped 5% year-over-year.
• Store sales decreased 3% compared with fiscal 2021.
• Gap online sales decreased 10% compared to the year-ago quarter and represented 41% of total net sales.

For the fiscal year ended Jan. 28, Gap reported:

• Net sales decreased 6% year over year to $15.6 billion.
• Online sales decreased 7% compared to last year and represented 38% of total net sales.
• Comparable sales decreased 7% year over year.
• Store sales declined 6% year over year.
• The company ended the year with 3,352 store locations in over 40 countries, of which 2,685 were company operated.

Percentage changes may not align exactly with dollar figures due to rounding.

Bloomberg News contributed to this report.

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