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Gap Posts Seventh Consecutive Quarterly Sales Decline; Abercrombie & Fitch Shares Plunge After Q3 Profits Plummet

Gap Inc.

Gap Inc. reported its seventh straight quarter of sales declines Thursday, which sent shares (GPS) spiraling down more than 12 percent the following morning. The San Francisco-based company’s net sales decreased 2 percent to $3.8 billion in the third quarter ended Oct. 29, compared with $3.86 billion last year. Profits fell to $204 million or 51 cents per share, versus $248 million or 61 cents per share.

On a comparable sales basis, Gap and Banana Republic were down 8 percent apiece in Q3 and while Old Navy gained 3 percent, it was less than the 4 percent increase achieved a year ago. Overall, the company’s comps were down 3 percent, which included an estimated negative impact from the Fishkill distribution center fire in August of roughly 2 percent. Gap ended the quarter with 3,742 stores in 50 countries after closing 41 locations, mainly in Asia, and expects net closures of about 65 company-operated stores in fiscal year 2016.

Abercrombie & Fitch

Abercrombie & Fitch had many problems in the third quarter: weak traffic in flagship and tourist locations; chain store traffic continued its downward trajectory; and seasonal categories underperformed. All of this combined to send net sales down 6 percent to $821.7 million from $878.6 million a year ago. Same-store sales also declined 6 percent, versus a 1 percent drop last year.

By brand, net sales decreased 13 percent to $358.3 million for Abercrombie and by 1 percent to $463.5 million for Hollister, as sales suffered in the U.S. and internationally. Net income plunged from $41.9 million or 60 cents per diluted share to $7.88 million or 12 cents per diluted share. And the outlook isn’t good: the company expects Q4 comps to be down 3.2% year-over-year. Shares (ANF) plummeted more than 14 percent before noon on Friday.