Gap Inc. reported better-than-expected third-quarter earnings on Thursday, leading to a stock price jump of more than 15% in extended trading. The company exceeded Wall Street’s estimates for profits and same-store sales, but remains cautious ahead of the holiday season as it grapples with underperforming brands, Banana Republic and Athleta.
In the third quarter, Gap saw a drop in net income and revenue compared to the same period the previous year, but still managed to exceed analysts’ expectations. The company’s gross margin improved thanks to lower commodity costs, fewer promotions, and cost-cutting initiatives. The company’s new CEO, Richard Dickson, is credited with having revived the Barbie franchise while at Mattel, and plans to use his expertise to revitalize the Gap brand.
Gap’s holiday outlook is described as “balanced” by Dickson, with Old Navy proving to be a bright spot with improved sales. However, Banana Republic and Athleta continue to be a drag on the company’s overall performance. Despite the challenges, Dickson is optimistic about the company’s potential, emphasizing the need for continued work to reset Athleta and further improve Banana Republic.
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