By Dhirendra Tripathi
Investing.com – Gap Inc. (NYSE:GPS) stock climbed 8.2% in premarket trading Friday after projecting sales to grow in the current year as the retailer adapts to new clothing trends among people returning to work.
The company behind Old Navy and Athleta brands said revenue will grow in the low-single-digit range after it overcame supply challenges to beat estimates for 2021.
"(Customers are) leaning into categories like dresses or new silhouettes and pants for back-to-work ... as well as denim with new leg shapes. It's a pretty radical change from last year," Reuters quoted CEO Sonia Syngal as saying in an earnings call.
Faced with the prospect of empty shelves due to supply chain snarls, Gap airlifted its stocks to meet holiday demand. The company continues to place orders earlier than usual to offset longer delivery times. As a result, first quarter ending inventory should be up in the mid-20s percentage range compared to a year ago, the company said. First quarter net sales are expected to be down around 7%.
Sales in the fourth quarter rose 2% to $4.53 billion as people looked to redo their wardrobe to go back to regular lives after two years of the pandemic.
Barring Old Navy, whose fourth quarter revenue fell 3%, all other brands grew, the company’s namesake brand rose the least with 7% growth. The relaunch of Banana Republic under a new premium positioning yielded results with the brand growing the most at 22%. The company said the brand is attracting more high-income shoppers. Athleta revenue grew by 18%.
Adjusted loss in the first quarter was 2 cents, narrower than estimates.