Old Navy, Athleta Power Gap Sales Forecast, Shares Jump

Gap Inc on Thursday raised its full-year net sales forecast for the second time, betting on hot demand for its Old Navy and Athleta clothing brands as socialising makes a comeback with easing pandemic curbs.

Shares jumped 7 percent in extended trading after Gap said Old Navy’s net sales increased 21 percent in the second quarter from 2019 levels, while Athleta surged 35 percent.

San Francisco-based Gap also lifted its annual profit estimate, with both forecasts coming in above Wall Street expectations as the return to relative normalcy powers sales across the apparel industry - from department stores Macy’s and Kohl’s to discounters like T.J. Maxx.

Even clothing chains that had stocked up generously are running out of tops and dresses as schools and colleges reopen, and people celebrate weddings, graduations and group events again, analysts had said.

Gap is also benefiting from tie-ups with celebrities including rapper Kanye West and Olympian Simon Biles, while sharpening its focus on inclusivity.

Like its peers, the Banana Republic brand owner has been spending more on its digital business to tap the pandemic-accelerated shift to online shopping. Earlier on Thursday, Gap said it bought Drapr, a startup that lets customers try on clothes virtually.

“Stepped-up marketing investments, improved brand management, and technology enhancements are paying off,” Chief Executive Officer Sonia Syngal said in a statement.

Gap expects fiscal 2021 net sales growth of about 30 percent versus a prior forecast in the low-to-mid 20 percent range. Analysts estimated a 24.3 percent growth, according to IBES data from Refinitiv.

The company forecast annual profit, excluding some charges, between $2.10 and $2.25 per share from $1.60 to $1.75 earlier. Analysts expected a profit of $1.80 per share.

Net sales rose 29 percent to $4.21 billion in the second quarter, beating estimates of $4.13 billion.

By Praveen Paramasivam; Editing by Devika Syamnath

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