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Gap shares drop 6% as June's turnaround evaporates

Gap investors may need to wait a bit longer for the company's turnaround.

After reporting its first comparable-sales increase in more than a year in June, that key metric once again turned negative in July.

Gap shares were off more than 6 percent late Tuesday morning. The stock slid 4 percent in after-hours trading Monday, after the apparel retailer said its same-store sales fell 4 percent in July and 2 percent during the second quarter. That's even as the company reported second-quarter revenue and earnings guidance that topped Wall Street's consensus forecasts.

For the second quarter, Gap's net sales were $3.85 billion, compared with $3.90 billion last year. That compares with an average analyst forecast of $3.78 billion, according to Thomson Reuters.

The company expects its diluted earnings per share to be between 30 cents to 31 cents a share for the quarter. Excluding the impact of its previously announced cost-saving strategies during the quarter, which include store closings, it expects to earn between 58 cents and 59 cents a share.

That compares with Thomson Reuters estimates that were calling for earnings of 48 cents a share, or a decline of 25 percent compared with last year.

The company's namesake Gap label saw sales drop 4 percent during the month and 3 percent during the quarter. Banana Republic's comparable revenues sank 14 percent in July and 9 percent for the three-month period. Old Navy was flat for both the month and quarter.

"While performance varied during the quarter, we made progress on our streamlining initiatives and continued to see signs of improvement in our larger brands," said Sabrina Simmons, Gap's chief financial officer.

Gap shares had rallied over the past month, over optimism surrounding its June comparable-sales report. The company's same-store revenue increased 2 percent that month, and marked the first time since March 2015 it saw a positive result in that metric.