Gap halts trading in its shares after early Q2 results as retailer appears to see sales rise

Shares of Gap ( GAP ) halted trading Thursday after the company shared its earnings release around 9:30 a.m. ET on its website, then retracted it.

The company did not immediately respond to a request for comment. It was scheduled to report earnings Thursday after the market close. Based on these since-retracted results, the company beat estimates on key metrics overall.

Revenue rose 5% to $3.72 billion, compared with estimates of $3.63 billion, while adjusted earnings per share were $0.54, compared with estimates of $0.40. Same-store sales rose 3%, also beating the 2.87% increase expected.

Before that, Wall Street expected Gap to report a second straight quarter of sales growth as it tries to revive its brands.

The retailer’s share price is up more than 6 percent year-to-date, compared with rival Abercrombie & Fitch Co. (ANF), which has seen its share price increase by more than 55% since the beginning of the year.

Old Navy and its namesake Gap brand are expected to drive growth, while Banana Republic’s sales are expected to be flat. Its premium lifestyle brand, Athleta, is expected to report declining sales.

CEO Richard Dickson is working on a turnaround of the classic retailer. As part of this, it changed its ticker symbol on the New York Stock Exchange last week.

It’s now “GAP” (GAP), rather than a nod to the “GPS” (GPS) navigation system, as reported by Brian Sozzi.

“We spent a lot of time driving our strategic priorities, bringing back financial and operational rigor, allowing us to reinvigorate these brands to the extent that we could revitalize them and be part of the cultural conversation,” Dickson, former COO at toy maker Mattel , told Yahoo Finance.

“Great product, great price, great story, great in-store experiences. These are all fundamentals that we are working to fix.”

Many analysts are looking to see if Gap can still succeed in an environment where consumers are strained.

There is “a continued tightening of middle-income consumers,” Bernstein analyst Aneesha Sherman told Yahoo Finance.

“Consumers in the middle are the ones who are repeatedly hit by a combination of inflation, student loan repayments, credit card debt, the complete wipeout of pandemic savings, and no improvement in overall sentiment. Those consumers are now looking for value. … and be more demanding.”

Read more: 5 Smart Ways to Save Money on Back-to-School Supplies

“We’re all working against a backdrop of macroeconomic uncertainty,” Dickson told Yahoo Finance, adding that while Gap remains cautious about how it pursues consumers, “there are always winners in every space.”

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Morgan Stanley analyst Alex Straton, who has an overweight rating on the stock, sees upside for second-half earnings given “increased confidence” in Dickson’s strategy and turnaround execution.

CFRA analyst Zachary Warring is not as bullish, reiterating a Sell rating in a recent note, reflecting the “highly competitive specialty apparel retail market,” which is primarily focused on youth, he wrote.

He said “high sensitivity to economic conditions” and the decline of malls could also impact the retailer.

Gap shares are up nearly 11% year to date, compared with the S&P 500’s ( ^GSPC ) 17% gain.

Earnings Breakdown

Here’s what Wall Street expects Gap to report, compared to last year’s Q2:

• Adjusted earnings per share: $0.40 compared to $0.34

• Income: $3.63 billion compared to $3.55 billion

• Same store sales growth: 2.87% vs -6%

  • Old Navy: 4.76% vs -1%

  • Gap: 4.09% vs -1%

  • Banana Republic: 0.09% vs -8%

  • Athlete: -4.03% vs. -7%

In the first quarter, the company said it expects to end 2024 with a slight increase in revenue on a 52-week basis.

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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @Brooke DiPalma or email them at [email protected].

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