Gap said restructuring efforts and easing supply chain costs led to unexpected gains in the first quarter.
Investors liked the news, sending the company’s stock up as much as 16% in extended trading.
Executives said they worked to reduce inventories and cut salaries and other operating costs in an effort to improve margins.
The company has been working to get rid of excess clothing purchased last year, and has seen its inventories fall for the second quarter in a row.
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Chief Financial Officer Katrina O’Connell said inventories were down 27% from a year ago.
Gap increased its inventory during the COVID-19 pandemic as consumer demand surged, but the normalization of spending left mountains of unsold inventory.
Due to the company’s organizational restructuring efforts, approximately 2,300 internal positions have been cut in two rounds of personnel cuts since September.
Interim CEO Bob Martin said on a post-earnings call that the job cuts should contribute to an estimated annual savings of nearly $550 million.
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The company plans to close about 350 unprofitable Gap and Banana Republic stores and open fewer than expected by the end of the year.
Still, sales for all four of Gap’s brands fell in the quarter as retailers struggled to refresh inventory and meet consumer trends.
Gap posted an adjusted profit of 1 cent in the first quarter, beating analyst expectations of a loss of 16 cents, according to IBES data from Refinitiv.
|GPS||Gap Co., Ltd.||7.42||-0.20||-2.69%|
The company’s net sales fell 6 percent to $3.28 billion. Analysts had expected $3.29 billion.
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Gap maintains its full-year revenue guidance and expects second-quarter sales to be in the mid-to-high single digits. Analysts on average expect sales to fall 4.95% in the second quarter.
Reuters contributed to this report.