Apparel retailer Gap Inc reported an 8 percent fall in quarterly profit, hurt by a stronger dollar, supply delays in the United States and lower demand for its namesake brand.
A series of fashion misses have turned shoppers away from the Gap brand towards fast fashion chains such as H&M, Inditex's Zara and Forever 21. The women's clothing business at the Gap brand has been a challenge for several seasons due to quality and fit issues and for being out of trend, Chief Executive Art Peck said during a post-earnings conference call.
"We are off trend and in some cases, way off the brand," he said.
A substantial and sustainable improvement at the Gap brand should not be expected before spring 2016, Stifel Nicolaus analyst Richard Jaffe said.
Gap's Old Navy line, however, has attracted more customers with its affordable-yet-trendy merchandise, helping it become the largest brand by sales in the company's portfolio. Comparable sales at Old Navy increased 3 percent in the first quarter.
A stronger dollar hit quarterly sales by $90 million and hurt profit by 3 percent in the first quarter ended May 2, Gap said on May 21. The dollar gained about 0.7 percent against a basket of currencies in the February-April quarter.
Shipment delays due to strikes at West Coast ports also hurt sales at US stores as fewer items were available for sale, the company said.
Gap's second-quarter results are also expected to be weighed down by late shipments, as the company will likely have to offer discounts on delayed merchandise, Chief Financial Officer Sabrina Simmons said on the call.
Total comparable sales fell 4 percent, while comparable sales fell 10 percent at the Gap brand and 8 percent at Banana Republic.
Teen apparel retailer Aeropostale Inc on May 21 estimated a bigger-than-expected second-quarter loss, citing low demand, disruptions at the West Coast ports and store closures. Gap said net income fell to $239 million, or 56 cents per share, from $260 million, or 58 cents per share, a year earlier.
Analysts on average estimated a profit of 56 cents per share, according to Thomson Reuters I/B/E/S. Revenue fell 3 percent to $3.66 billion.