Pedestrians pass in front of Gap Inc. and Old Navy Inc. stores in the Times Square area of New York.

Mark Kauzlarich | Bloomberg | Getty Images

Gap Inc.’s second-quarter sales fell short of analysts’ expectations in what the apparel retailer’s CEO called a “challenging environment,” the company announced on Thursday. 

Its shares initially slid more than 7% before recovering in after-hours trading following the news. Recently, the stock was down around 1%. 

Here’s how Gap did for the quarter ended Aug. 3, compared with what analysts were expecting, based on Refinitiv data: 

  • Adjusted earnings per share: 63 cents vs. 53 cents expected 
  • Revenue: $4.01 billion vs. $4.02 billion expected 
  • Same-store sales: down 4% vs. a decline of 3.1% expected 

“We are operating in a challenging environment, but I remain confident in the strength of our brands and our plans for the future,” CEO Art Peck said in a statement. 

Gap Inc.’s net income fell to $168 million, or 44 cents per share, from $297 million, or 76 cents a share, a year ago. Excluding one-time items, it earned 63 cents, 10 cents ahead of estimates based on a poll by Refinitiv. 

Net sales dropped about 2% to $4.01 billion from $4.09 billion a year ago, short of estimates for $4.02 billion.

Sales at all Gap Inc. stores operating for at least 12 months and its websites were down 4%, worse than an anticipated decline of 3.1%. A year ago, same-store sales climbed 2%. 

Peck had previously called Gap’s first quarter of 2019 “extremely challenging,” saying he was “not at all satisfied” with the results. Business was “slow,” he said, with unsold inventories piling up on shelves.

The company has, meanwhile, been shutting some of its namesake Gap stores, turning investments toward its stronger banners Old Navy and Athleta. Athleta, an athletic apparel brand for women akin to Lululemon, just recently signed its first sponsored athlete, track star Allyson Felix.

Gap Inc. is also in the process of splitting its business and spinning off Old Navy into its own separate company. The move will leave Gap, Banana Republic, Athleta and Hill City in another holding company. That deal is expected to be complete next year.

“Heading into the second half of the year, we remain highly focused on inventory and expense discipline to improve results,” Peck said on Thursday.

Gap shares, valued at $6.7 billion, are down more than 30% this year.

This story is developing. Please check back for updates.

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