Gap Inc. (NYSE:GPS) released its first quarter results for fiscal 2016, showing a decrease compared to the same period last year. The company also announced that it would close 75 overseas stores to improve the declining sales.
Net sales were $3.44 billion for the first quarter, dropping around 6% from $3.66 billion last year. Gap’s net income dropped 46.9% to $127 million and diluted earnings per share were $0.32, matching analyst estimate. The decline in net sales is partly due to translation of foreign currencies into U.S. Dollars.
The company also lowered its guidance for capital spending of fiscal 2016 to be around $525 million, $125 million less than prior expectations. However, Gap is not reaffirming its guidance for earnings per share of $2.20-$2.25 for fiscal 2016.
Gap stocks dropped around 30% this year after the close price of $17.28 on Thursday.
In order to boost sales and revive its fortune, the company expected to close select dilutive Banana Republic stores internationally. Gap estimated sales loss to be $250 million due to the store closes and would save $275 million in fiscal 2016.
On Thursday, Gap announced that it would close 75 Old Navy and Banana Republic stores overseas, including all its 53 Old Navy stores in Japan. "Old Navy's near-term growth ambitions will be anchored in North America, including its most recent debut of company-operated stores in Mexico, as well as China and its global franchise operations," the firm said in a statement. Gap is trying to focus on areas that has the most growth potential.
In North America, Gap Inc. currently had 1,029 Old Navy stores and 607 Banana Republic stores. In Asia and Europe, Gap owned 69 Old Navy stores and 61 Banana Republic stores.
“I’m obviously disappointed that we’re going to be discontinuing operations,” Gap chief executive Art Peck said on the conference call. “But I view it as a sign of a good company that you acknowledge when a business isn’t going to deliver.”