Gap Inc., like other retailers selling non-essentials, suffered dearly in the first quarter due to COVID-19, reporting a loss of $932 million in the last quarter, compared to a $227 million profit in the year ago period.
Gap Inc. during the quarter was forced to close 90 percent of its global store fleet beginning March 19, pulling revenues down to $2.1 billion from $3.7 billion in the first quarter of 2019. The operating loss was $1.2 billion in the quarter ended May 2. Stores around the world began reopening on May 9.
The company cited lost sales and corresponding merchandise margin from the temporary store closures, a non-cash impairment charge of $484 million related to store assets and operating lease assets, as well as a $235 million non-cash inventory impairment charge, for contributing to the huge loss.
However, the company saw double-digit gains online and enacted several measures to strengthen its cash position, as well as secured additional financing early in the second quarter, putting the retailer in “a solid financial position to weather the pandemic,” Gap said in its earnings release Thursday. The company also said it leveraged its omni capabilities to continue to serve customer demand online through its scaled e-commerce platform.
“Our teams’ ability to pivot quickly and lean into our strong online business resulted in an encouraging 40 percent online sales growth in April,” said Sonia Syngal, president and chief executive officer of Gap Inc. “While net sales and stores sales continued to reflect material declines in May as a result of closures, we saw over 100 percent growth in online sales during the month. This online momentum, enabled by new omni-capabilities that have expanded the way customers can shop with us, leaves us well-positioned to fuel our brands going forward.”
Syngal added, “Today we have more than 1,500 stores open in North America, ahead of plan, and as stay-at-home restrictions ease in many markets, we expect to have the vast majority of our North American stores re-opened in June. We are optimistic that the actions we’ve taken will provide a stable foundation as we navigate near-term uncertainty and refashion Gap Inc. for long-term growth.”