Gap shares tank 10% on earnings miss, CEO calls quarter 'extremely challenging'

Art Peck, president and chief executive officer of Gap Inc.

David Paul Morris | Bloomberg | Getty Images

Gap Inc. shares tanked Thursday after the apparel retailer reported quarterly earnings and sales short of Wall Street estimates and slashed its full-year profit outlook.

Its shares cratered more than 10% in after-hours trading, having closed the day at a fresh low of $20.60 not seen since June 2016.

Here's what the clothing retailer reported for its fiscal first quarter, compared with what analysts were expecting, based on Refinitiv data:

• Earnings per share, adjusted: 24 cents vs. 32 cents, expected
• Revenues: $3.71 billion vs. $3.77 billion expected
• Same-store sales: down 4% vs. a 1.1% drop expected

CEO Art Peck called the latest quarter "extremely challenging," saying he was "not at all satisfied" with the results. "We are committed to improving our execution and performance this year," he said.

Same-store sales at Gap's namesake brand were down 10%, compared with a drop of 4% a year ago. Same-store sales at Old Navy — typically the brightest spot at Gap Inc. — were down 1%, compared with an increase of 3% a year ago. Banana Republic same-store sales were down 3%, compared with 3% growth this same quarter in 2018.

The retailer cut its annual profit outlook, now expecting adjusted earnings per share to fall within a range of $2.05 to $2.15 this year, compared with a prior range of $2.40 to $2.55. It says same-store sales should now be down a low single digits in fiscal 2019.

The report from Gap comes as a slew of apparel retailers ranging from Canada Goose to Abercrombie & Fitch to J.Jill have reported dismal earnings this week, dragging down the S&P 500 Retail ETF (XRT). That index of stocks has fallen more than 11% so far this month. Gap shares are down about 20% so far this year.

Gap shares had surged more than 20% on Feb. 28, when the retailer announced it plans to spin off its Old Navy brand into its own public company, leaving Gap's other brands, including its namesake one, in a new, still-unnamed holding company. That deal isn't expected to be complete until 2020.

This is a developing story. Please check back for updates.

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