Retailer Gap (GPS) was forced to cut its profit expectations for the year last Thursday after it reported a decline in fiscal first-quarter sales. The decline was exacerbated by Gap’s Old Navy business, which experienced an imbalanced mix of clothing sizes, ongoing inventory delays, and an uptick in price-lowering promotions.
In addition, this year’s record inflation has been tough on lower-income consumers, which are Old Navy’s target market. Gap’s CEO Sonie Syngal hopes the “volatile” consumer behavior of the last two years will balance out over time.
Costco (COST) had much better news to share when it reported quarterly earnings last Thursday. The retailer beat analyst expectations of revenue, which grew 16.2% year-over-year. E-commerce sales rose 7.4%, a good sign for a historically brick-and-mortar company.
Despite a big jump in sales, rising costs and supply chain issues cut into Costco’s profit margins. Earnings per share were right in line with expectations, increasing 10.5% year-over-year.
Why it matters
Shares of Gap fell by nearly 20% the day after its dissapointing earnings report and profit outlook. Costco stock rose steadily every day last week, getting a bump of more than 5% on Thursday.
