Gap Stock Falls Despite Solid Q1 Earnings & Higher Comparable Sales

Core Viewpoint - The Gap, Inc. reported strong first-quarter fiscal 2024 results, with both earnings and net sales exceeding expectations and showing year-over-year growth [1][3]. Financial Performance - Earnings per share were 51 cents, surpassing the Zacks Consensus Estimate of 44 cents, and increased by 24% from the previous year [3]. - Net sales rose by 2% year over year to $3.46 billion, exceeding the consensus estimate of$3.42 billion [3]. - Comparable sales also increased by 2% year over year, with online sales growing by 6% and accounting for 39% of total sales [3]. Brand Performance - Old Navy's net sales increased by 3% year over year to $2 billion, marking its ninth consecutive quarter of market share gains [5]. - Gap Global saw a 5$724 million, achieving its sixth straight quarter of positive comps [6]. - Banana Republic's net sales decreased by 3% year over year to $428 million, while Athleta's net sales dropped by 6$308 million [7]. Margins and Costs - The gross margin improved to 41.8%, up 60 basis points year over year [8]. - The operating margin increased to 7.5%, growing by 140 basis points from the previous year [9]. - Operating expenses were reported at $1.2 billion, a slight decrease of 0.3$1.98 billion, a 29.4% increase from the previous year [11]. - Total stockholders' equity stood at $3.3 billion, with long-term debt of$1.5 billion [11]. - Merchandise inventory rose by 7.7% year over year to $2.1 million [11]. Future Outlook - For fiscal 2025, the company projects sales growth of 1-2$15.1 billion in fiscal 2024, driven by Old Navy and Gap's performance [15]. - Management anticipates a slight increase in gross margin and expects to achieve approximately $150 million in cost savings [16]. - Operating income is projected to rise by 8-10$1.11 billion, excluding tariff impacts [17].