Gap reportedly considering selling China business due to poor sales

March 08, 2021 CV TECH INC

US apparel group Gap Inc. is considering potential options, including selling its China business to restructure its operations in the country, Sina Finance said Tuesday, citing people familiar with the matter.


Gap is working with an advisory firm to examine options and has approached potential buyers to assess their acquisition interests, the report said, adding that discussions are in the early stages and the company may also decide to keep the business.


The company, which owns brands such as the Banana Republic and Gap, entered the Chinese market in 2010 and operates offline and on the App Tmall, a Chinese e-commerce platform owned by Alibaba Group.


Gap pulled its Old Navy brand out of China last year after scrapping plans to spin it off for an IPO.


Gap reported earnings last week showing net sales of $4.42 billion in the fourth quarter of 2020, down 5% from a year earlier and below analysts’ estimates of $4.66 billion.


It reported a net income of $234 million for the fourth quarter, compared with a net loss of $184 million recorded in the same period a year earlier. It reported diluted earnings per share of $0.61, compared with a loss of $0.49 per share recorded in the same period a year earlier.


By brand, same-store sales increased 26% year-on-year at Athleta, increased 7% year-on-year at Old Navy, decreased 6% year-on-year at the Gap brand, and decreased 22% year-on-year at the Banana Republic.


Looking ahead to fiscal 2021, the company expects net sales to grow about 15 percent and diluted earnings per share to be in the range of $1.20 to $1.35.


Gap shares were up 34 percent over the past two months amid a general sell-off in US technology stocks.


Gap reportedly considering selling China business due to poor sales-CnTechPost


Gap reportedly considering selling China business due to poor sales-CnTechPost