Banana Republic, Old Navy fail to meet predictions as spring clothing purchases lag

Banana Republic, Old Navy fail to meet predictions as spring clothing purchases lag By Nadia Rogoszynski
REUTERS
May 2000

NEW YORK - Gap Inc. shares dipped Thursday after the casual clothing retailer reported disappointing sales for May and analysts expressed concern about second-quarter revenues.

At midday, shares of the San Francisco-based retailer were off 44 cents to $34.63, pushing the stock closer to its 52-week low of $30-81.

On Wednesday Gap reported sales at stores open at least a year - "same-store sales" - fell 2 percent in May compared with a year earlier. The company said sales were depressed by a slower-than-expected Easter season.

Wall Street had expected the retailer to report same-store sales gains of between 1 and 4 percent, according to various analyst reports.

The S&P retail index was off 4.28 to 876.63 after many U.S. retailers reported May results that were hurt by chilly, rainy weather.

"Comparable-store sales numbers (at Gap) were a bit of a negative surprise," said Todd Slater, as analyst at Lazard Freres. "Comps were down at Old Navy and Banana Republic but margins were up at Banana and at the Gap division. There is a positive and a negative side to this."

He added, "My view is that revenue numbers for the second quarter may be difficult to meet, but cleaner inventory numbers are good for margins. Inventories going into June are better than the company had hope".

"There is clearly more risk to the numbers than there was a month ago. It will take mid-single-digit comps for the next two months in order to meet secondquarter revenue expectations."

Marcia Aaron, an analyst at Deutsche Banc Alex. Brown, agreed. She did not change her fiscal second-quarter earnings estimate of 27 cents a share for Gap but said, "We continue to believe that there is potential modest downside risk if sales do not improve.

"We continue to believe that results will be difficult for Gap in the second quarter and look for an improving trend in the third quarter."



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