May 27 (Reuters) - Gap Inc raised its forecast for annual sales and profit, expecting an unabated surge in demand for new apparel as more people begin to step out and socialize after a year of hunkering down at home due to the pandemic.
Following what is seen as a boom quarter for the retail sector, Gap is also reaping its benefits after having suffered bitterly at the peak of the health crisis last year that followed years of weak sales due to intense competition and a shift in preference for online shopping.
The apparel retailer’s stock has gained nearly 75% this year.
Since last year’s low, Chief Executive Officer Sonia Syngal has also revived the company’s brands through celebrity partnerships, including those with rapper Kanye West’s Yeezy and Olympic gymnast Simone Biles, and a focus on online as the pandemic triggered such demand.
“We saw a resurgence in summer fashion with dresses rebounding, showing that customers are emerging from the crisis wanting to express their style,” Syngal said on Thursday.
The San Francisco-based company expects fiscal 2021 net sales to grow in the low-to-mid 20% range from a year ago, compared with its prior projection of mid-to-high teens.
Analysts were forecasting sales growth of 17.8%, according to IBES data from Refinitiv.
Gap expects diluted earnings between $1.55 and $1.70 per share, up from its prior forecast of $1.20 to $1.35.
First-quarter net sales surged 89% to $3.99 billion from a year earlier, beating analysts’ average expectation of $3.45 billion, largely driven by demand for Old Navy, the company’s affordable label for families, and athleisure brand Athleta.
Net income came in at $166 million, or 43 cents per share, for the three months ended May 1, compared with a loss of $932 million, or $2.51 per share.
Reporting by Nivedita Balu in Bengaluru; Editing by Shinjini Ganguli