Shares jumped 7% in extended trading after Gap said Old Navy’s net sales increased 21% in the second quarter from 2019 levels, while Athleta surged 35%.
San Francisco-based Gap also lifted its annual profit estimate, with both forecasts coming in above Wall Street expectations as the return to relative normalcy powers sales across the apparel industry – from department stores Macy’s (NYSE:M) and Kohl’s (NYSE:KSS) to discounters like T.J. Maxx.
Even clothing chains that had stocked up generously are running out of tops and dresses as schools and colleges reopen, and people celebrate weddings, graduations and group events again, analysts had said.
Gap is also benefiting from tie-ups with celebrities including rapper Kanye West and Olympian Simon Biles, while sharpening its focus on inclusivity.
Like its peers, the Banana Republic brand owner has been spending more on its digital business to tap the pandemic-accelerated shift to online shopping. Earlier on Thursday, Gap said it bought Drapr, a startup that lets customers try on clothes virtually.
“Stepped-up marketing investments, improved brand management, and technology enhancements are paying off,” Chief Executive Officer Sonia Syngal said in a statement.
Gap expects fiscal 2021 net sales growth of about 30% versus a prior forecast in the low-to-mid 20% range. Analysts estimated a 24.3% growth, according to IBES data from Refinitiv.
The company forecast annual profit, excluding some charges, between $2.10 and $2.25 per share from $1.60 to $1.75 earlier. Analysts expected a profit of $1.80 per share.
Net sales rose 29% to $4.21 billion in the second quarter, beating estimates of $4.13 billion.