Gap’s quarterly sales and revenue numbers exceeded Wall Street’s expectations thanks to continued demand for formal clothing from affluent customers.
The increase in sales came as more consumers chose to buy pants and dresses as they returned to offices, traveling for work and social engagements.
Gap’s Banana Republic brand, which offers affordable luxury clothing, reported an 8% increase in sales. Meanwhile, Old Navy, which primarily offers low-cost clothing options, saw a 2% increase in sales.
Overall, Q3 net sales increased by 2.5% to $4.04 billion, which was higher than analysts’ estimates of $3.80 billion.
That being said, the retailers warned that soaring commodity prices are negatively impacting lower-income consumers’ spending capacity for things such as apparel.
The company expects Q4 sales to be down in mid-single digital, compared to analysts’ estimates of a 0.6% decline, Reuters reported. “We did see strong volume in October slow a bit in the end and a little bit of a slow start to November,” said Gap’s finance chief Katrina O’Connell on a post-earnings call.
According to Zachary Warring, equity analyst at CFRA Research, apparel retailers like Gap may be forced to rely on discounting to drive sales during the peak holiday season to compensate for weak consumer demand.