Gap reports 3 percent decline in Q3 net sales

On a reported basis, Gap’s third quarter diluted earnings per share were 0.61 dollar. On an adjusted basis, the company’s diluted earnings per share were 0.63 dollar. Net sales decreased 3 percent to 3.86 billion dollars compared with 3.97 billion dollars for the third quarter last year. On a constant currency basis, net sales were flat compared with last year.

“With a challenging third quarter behind us, we are sharply focused on holiday execution across all channels,” said Art Peck, Chief Executive Officer, Gap, adding, “We are driving forward on our key strategies designed to fuel future growth. Old Navy delivered another consecutive quarter of growth.”

Third quarter business highlights

Year-to-date, Gap distributed about 1.1 billion dollars to shareholders through share repurchases and dividends. Old Navy delivered another quarter of growth as the brand continued to leverage the power of its more responsive product operating model. As part of Old Navy’s global growth strategy, the brand debuted seven company-operated stores in Mexico during the quarter, with plans to open a total of about nine stores in the country by the end of the fiscal year.

Athleta continued to grow its footprint during the quarter and is on track to end the fiscal year with about 120 US locations. Additionally, during the quarter, the brand launched its first-ever designer collaboration with Derek Lam 10 Crosby.

Comparable sales for the quarter were down 2 percent versus a 2 percent decrease last year. Comparable sales by global brand at Gap Global were negative 4 percent versus negative 5 percent last year, at Banana Republic Global, negative 12 percent versus flat last year and Old Navy Global - positive 4 percent versus positive 1 percent last year.

The company noted that the translation of foreign currencies into US dollars negatively impacted the company’s reported net sales for the third quarter by about 100 million dollars, primarily due to the weakening Japanese yen and Canadian dollar.

Additional highlights and 2015 outlook

On a reported basis, third quarter diluted earnings per share were 0.61 dollar. The company’s adjusted diluted earnings per share, excluding the negative impact of about 0.02 dollar from the strategic actions, were 0.63 dollar for the third quarter of fiscal year 2015. The company updated its adjusted diluted earnings per share guidance for the full fiscal year 2015 to be in the range of 2.38 dollars to 2.42 dollars and now expects its adjusted operating margin to be about 10.5 percent in fiscal year 2015.