Gap Inc (NYSE:GPS) shares surged more than 26% after the retailer impressed with its first quarter earnings report and raised its full-year guidance.
The report signalled that efforts by the retailer, whose brands include Old Navy, Gap, Banana Republic and Athleta, to turn around its business under new CEO Richard Dickson are working.
It now expects full year sales to be up slightly from its sales of $14.9 billion in 2023, compared to its prior outlook that sales would be roughly flat.
It expects operating income to grow in the mid-40% range from $606 million last year, up from its earlier forecast of low-to-mid teens growth.
For the first quarter, which ended May 4, 2024, Gap posted earnings per share of $0.41, significantly higher than the $0.14 expected by Wall Street analysts and an improvement from a loss per share of $0.05 in the year-ago quarter.
It saw a 3% increase in revenue to $3.4 billion, ahead of estimates of $3.29 billion.
Comparable sales increased 3% year-over-year and online sales rose 5% to represent 38% of total net sales.
Gross margin improved by 410 basis points to 41.2%.
“Our first quarter results are giving us confidence to raise both sales and operating income guidance for the full year,” CEO Dickson commented. "We are on a journey to become a high-performing house of iconic American brands that shape culture.”
Shares of Gap added 26.2% at about $28 in the early afternoon on Friday.