A few days ago, Sonia Syngal, the chief executive of GAP, a US apparel brand, suddenly resigned in the context of declining sales and profit reduction. Some Wall Street analysts believe that this may allow the troubled GAP to sell one or more brands.
GAP (GPS-US) also issued a profit warning while announcing the replacement of the CEO. Due to the continued decline in sales, it is estimated that the adjusted operating profit rate this quarter will drop to zero or fall into a negative value, and sales will not be as good as the same period last year. , fell nearly 8% in early trading, but as of the intraday share price decline narrowed to 3.65%, and the share price was tentatively reported at $8.45.
Credit Suisse analyst Michael Binetti said there was a significant chance of GAP’s announcement that it was exploring strategic alternatives, which could include a spin-off of Athleta, or a massive cut in selling and administrative expenses, following news of the resignation of its chief executive. rise.
GAP owns brands such as Old Navy and Banana Republic. In 2020, it considered splitting Old Navy. However, due to the increased cost and complexity of the brand split.
Old Navy accounts for more than half of GAP’s sales, but a post-pandemic recovery has been hampered by miscalculation of fashion trends, supply chain chaos and decades of high inflation.
Several Wall Street analysts said the Old Navy’s problems could extend into next year and GAP’s earnings would suffer as it misses out on stocking major styles while shelves are still chock-full of out-of-season items, unpopular styles and big-ticket items. size clothing.
Profits at GAP have fallen over the past two quarters, and the company in May forecast gross margins in fiscal 2022 to be between 36.5% and 37.5%, down from fiscal 2021 levels.
Wells Fargo analyst Ike Boruchow believes that GAP has a chance to break through the adversity in 2022, but the problems of the Old Navy have led to further loss of credibility.