Gap Pushes for Reset as Sales Swoon in Holiday Quarter

Mr. Martin told analysts on a conference call that the board has narrowed its search for a new leader, who will come from outside the company.

Net sales fell 6% to $4.24 billion in the three months to Jan. 28, compared with the same period a year ago. Sales at stores open at least a year fell 5%. The company said the sales declines were in line with its expectations.

Its net loss widened to $273 million from $16 million a year earlier. 

The company said it had identified an additional $300 million in cost cuts, including stripping out layers of management. It didn’t say how many jobs would be lost. The cuts are in addition to $250 million in annualized savings the company said it was seeking last year.

Gap finance chief

Katrina O’Connell

told analysts on Thursday that the company had more to do on cost cutting beyond what it has so far identified without giving specific details. 

Ms. O’Connell said the company’s lower income shoppers have been buying less since the middle of last year. She said there has also been a bit of softening throughout the rest of its consumer base. 

The company expects sales in the current quarter to decline in the mid-single digit range compared with the same period a year ago. Last year’s first quarter included about $60 million in sales from Gap China, which has since been sold. 

Athleta CEO Mary Beth Laughton is leaving the company effective Thursday. Athleta’s sales in the recent period fell 1% from a year earlier to $436 million. Mr. Martin said the brand suffered from product acceptance challenges over the past several quarters. On a conference call with analysts, Mr. Martin said the brand had problems with color, style and fit. It has lost ground to other makers of athletic gear such as

Lululemon Athletica Inc.,

where sales continue to surge.

Additionally, Sheila Peters, chief people officer, will leave the company at the end of the year.

Gap’s Old Navy brand stumbled last year when it tried to make clothing sizes for everyone. The strategy backfired, leaving it with excess inventory. Mr. Martin said the company had made progress clearing out the excess goods. Overall inventory declined 21% in the recent period, compared with a year earlier.

Several retailers reported progress in recent months in thinning out out-of-season or slower-moving goods from their stores and warehouses. 

Shares fell more than 7% in after-hours trading. Gap’s shares are down more than 19% over the past 12 months, compared with a 8.4% decline in the S&P 500. 

The wind-down of Gap’s partnership with Mr. West, who goes by Ye, hurt the brand’s North American sales in the most recent period, the company said. The hit to its North American Gap business was about $16 million, according to financial data provided by the company. The company entered the high-profile partnership in 2020 to develop a collection of clothing under the Yeezy Gap brand.

Write to Suzanne Kapner at Suzanne.Kapner@dowjones.com

Mr. Martin told analysts on a conference call that the board has narrowed its search for a new leader, who will come from outside the company.

Net sales fell 6% to $4.24 billion in the three months to Jan. 28, compared with the same period a year ago. Sales at stores open at least a year fell 5%. The company said the sales declines were in line with its expectations.

Its net loss widened to $273 million from $16 million a year earlier. 

The company said it had identified an additional $300 million in cost cuts, including stripping out layers of management. It didn’t say how many jobs would be lost. The cuts are in addition to $250 million in annualized savings the company said it was seeking last year.

Gap finance chief

Katrina O’Connell

told analysts on Thursday that the company had more to do on cost cutting beyond what it has so far identified without giving specific details. 

Ms. O’Connell said the company’s lower income shoppers have been buying less since the middle of last year. She said there has also been a bit of softening throughout the rest of its consumer base. 

The company expects sales in the current quarter to decline in the mid-single digit range compared with the same period a year ago. Last year’s first quarter included about $60 million in sales from Gap China, which has since been sold. 

Athleta CEO Mary Beth Laughton is leaving the company effective Thursday. Athleta’s sales in the recent period fell 1% from a year earlier to $436 million. Mr. Martin said the brand suffered from product acceptance challenges over the past several quarters. On a conference call with analysts, Mr. Martin said the brand had problems with color, style and fit. It has lost ground to other makers of athletic gear such as

Lululemon Athletica Inc.,

where sales continue to surge.

Additionally, Sheila Peters, chief people officer, will leave the company at the end of the year.

Gap’s Old Navy brand stumbled last year when it tried to make clothing sizes for everyone. The strategy backfired, leaving it with excess inventory. Mr. Martin said the company had made progress clearing out the excess goods. Overall inventory declined 21% in the recent period, compared with a year earlier.

Several retailers reported progress in recent months in thinning out out-of-season or slower-moving goods from their stores and warehouses. 

Shares fell more than 7% in after-hours trading. Gap’s shares are down more than 19% over the past 12 months, compared with a 8.4% decline in the S&P 500. 

The wind-down of Gap’s partnership with Mr. West, who goes by Ye, hurt the brand’s North American sales in the most recent period, the company said. The hit to its North American Gap business was about $16 million, according to financial data provided by the company. The company entered the high-profile partnership in 2020 to develop a collection of clothing under the Yeezy Gap brand.

Write to Suzanne Kapner at Suzanne.Kapner@dowjones.com