Gap shares perk up as it aims to reverse sales slowdown in 2017

Will 2017 be the year that US retailer Gap gets back to growth?

The company saw its shares rise 1 per cent in after-hours trading after it said it expects comparable sales, a key industry metric, to be flat to up slightly in 2017, after falling 2 per cent in 2016 — and 7 per cent the year before that.

Over the past few years, Gap — like many mall-based retailers that rely heavily on foot traffic — have been losing ground to fast-fashion retailers like H&M and Zara and online retailers like Amazon.

But recently it has been focused “on improving the quality and relevance of our products, increasing our responsiveness to trends and demand, and creating more synergy across channels to deliver the experiences our customers want and expect, however they choose to shop,” said chief executive Art Peck.

That has led to a strong finish for 2016, including during the critical holiday shopping season, Mr Peck said in unveiling the company’s earnings for the three-month period ending January 28.

Over the past quarter, comparable sales were up 2 per cent, compared with a 7 per cent decline the year before, and revenue clocked in at $4.43bn, a 1 per cent improvement over the same period a year earlier. Earnings per share were 55 cents, and net income was $220m.

For fiscal year 2017, Gap said it expects earnings per share to come in at $1.95-$2.05, an improvement over the $1.69 it posted for FY 2016. However, it warned that net sales could be impacted by foreign currency fluctuations, particularly as the US dollar gather strength.

Gap shares have fallen more than 10 per cent over the past 12 months.