Old Navy and Gap brands saw 1% sales growth in Q3 FY24. Credit: rblfmr/Shutterstock.

Gap Inc’s third quarter (Q3) ending 2 November 2024 saw an operating income of $355m and an operating margin of 9.3%, which was the highest in seven years and reflected a 270 basis point improvement over last year’s margin.

Its operating expenses slightly decreased to $1.28bn in this quarter from $1.30bn in the corresponding quarter of the previous year. 

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The company’s net income was $274m compared to $218m in the same period last year. This profit rise was echoed in its diluted earnings per share, which climbed by 24.1% to $0.72 from $0.58 in the prior year.  

Gap Inc’s gross margin improved to 42.7%, which was a notable increase of 140 basis points over last year’s figure. 

Gap delivers successful Q3

Gap Inc president and CEO Richard Dickson said: “I’m proud that Gap delivered another successful quarter, growing net sales for the fourth consecutive quarter and gaining market share across all brands while meaningfully expanding operating margin.  

“Consistent execution of our strategic priorities, including the rigor and repetition we’re applying to our brand reinvigoration playbook, is making us a stronger company and demonstrates our continued progress in unlocking Gap’s full potential.”  

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Gap Inc’s Old Navy brand registered a modest increase in net sales of 1%, reaching $2.2bn, while comparable sales were flat over the quarter.  

The fashion conglomerate’s Gap brand also registered 1% sales growth to $899m in Q3 FY24 and comparable sales were up 3%. 

Its Banana Republic brand saw sales rise by 2% to $469m, driven by its men’s business during the quarter.  

Athleta brand also achieved a 4% increase with third-quarter net sales of $290m. Its comparable sales were up 5% over the quarter. 

The group maintained a significant retail presence with 3,603 stores across approximately 40 countries, with 2,544 being company-operated.  

The growth was bolstered by a robust 7% increase in online sales, which now account for 40% of the total net sales. 

Gap FY24 Outlook 

Gap Inc has revised its full year forecast upwards for FY24. The company now anticipates a net sales growth between 1.5% and 2.0% on a comparable 52-week basis.  

It also expects operating income to grow at a mid to high-60% rate compared to the previous expectation of mid to high 50% growth range. 

“Holiday is off to a strong start and we remain focused on executing with excellence in the fourth quarter. Our performance year-to-date gives us the confidence to raise our full year outlook for sales, gross margin and operating income growth,” Dickson added.