Gap’s Stock Jumps on Surprise Q1 Profit — Retail Bum

Apparel retailer Gap pleasantly surprised investors by announcing an unexpected profit for the first quarter, leading to a 16% surge in its shares during extended trading.

The company attributed this positive outcome to its ongoing restructuring initiatives and efforts to alleviate supply chain costs.

Lower air freight expenses and enhanced promotional activity played a significant role in Gap’s adjusted quarterly merchandise margin, which saw a substantial increase of 610 basis points.

Gap’s efforts to address surplus inventory also paid off, with inventory levels down by 27% compared to the previous year, according to Chief Financial Officer Katrina O’Connell.

The company was previously dealing with excess inventory as it had accelerated its ordering process during the COVID-19 pandemic to keep up with heightened consumer demand. However, as spending patterns returned to normal, the company faced excess inventory that remained unsold.

“It was a decent quarter that surpassed expectations and alleviated concerns,” said CFRA Research Analyst Zachary Warring.

Over the past few months, the retailer has undertaken two rounds of layoffs, eliminating approximately 2,300 corporate positions. The move aligns the company with other major…