Gap shares rose 30% on Friday as an upbeat quarter gave a fresh dose of optimism to investors who have bought aggressively since the company named Barbie executive Richard Dickson as its new CEO.
If current gains hold, the stock will have nearly doubled since late July, after the former Mattel executive was tapped to revive the once sought-after brand.
Gap shares rose as much as 33% to hit a one-and-a-half-year high of $18.14. The stock closed at $17.85.
Gap’s third-quarter earnings release Thursday showed a significant inventory drawdown, even as its holiday forecast disappointed.
Dickson worked at Mattel for two decades and was responsible for reviving the Barbie brand, which re-entered the cultural zeitgeist in 2023 following the success of the movie “Barbie.”
Investors are pinning their hopes on Dickson’s efforts to bring more modern clothing to Gap’s Old Navy brand, and Morningstar analyst David Swartz said the earnings showed that “something good is happening for the first time in a long time.” , maybe”.
“Gap has been in bad shape for so long that anyone who brings some kind of positive outlook to the company would be good right now,” Swartz said.
Old Navy’s comparable sales rose 1% in the third quarter, its first increase in 10 quarters, after the brand languished last year due to out-of-sync inventory.
“Old Navy gained market share, early and encouraging evidence that work to improve both product assortment and brand messaging” were driving results, said Katrina O’Connell, Gap’s chief financial officer.
The company, like major retailers Walmart and Target, noted that inventory levels have declined from last year’s peak, which had been a significant surplus for several quarters.
However, Gap joined other retailers in sounding a cautious note on spending ahead of the important shopping season.
Executives also alluded to a “longer recovery time” for its other brands Banana Republic and Athleta, which have experienced “product failures” and weak “retail execution.”
