Apparel retail company Gap Inc. made a huge turnaround this quarter in sales and profits even as global commerce faces continued challenges amid high inflation rates.
The company, which also manages clothing brands like Banana Republic and Old Navy, revealed in its third-quarter earnings report that profits are on an upswing.
Online sales company wide increased 5% from a year ago, representing 39% of Gap’s total Q3 sales.
In Gap’s Thursday (Nov. 17) third-quarter earnings call, Interim CEO Bobby Martin attributed these increased profits to the company’s continued efforts to offer customers discounts on their inventory, stating, “We continue to rely heavily on markdowns and discounting to sell-through reliable styles this quarter and have reduced receipts in Q4. These actions will allow us to enter fiscal 2023 in an improved inventory position.”
Gap also made positive strides in online sales this quarter thanks to its recent collaborative efforts to set its brands apart in eCommerce around the world.
Also read: Gap Sells China Retail Business to eCommerce Platform Baozun
First, Gap revealed its plans to sell its Chinese eCommerce business to local digital platform Baozun on Nov. 8, which Gap has worked with in the past to distribute its apparel in the region.
At the time, Mark Breitbard, president and CEO of Gap, explained the reason behind this sell-off was to “not only connect with new and existing customers, but to provide them with personalized, service-oriented experiences.”
See also: Gap to Use Amazon for Sales and Delivery
Then, in the U.S. and Canada, Gap announced on Nov. 10 that it would be partnering with Amazon to expand its clothing sales on the eCommerce company’s website.
This move indicates the company’s desire to stay connected to its customers even as a shift from brick-and-mortar retail continues in favor of online shopping, and by making its clothing accessible to a larger customer base through Amazon.
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Canadian banks are set to announce their quarterly earnings this week, and while analysts are optimistic about the results, they note that potential U.S. tariffs may dampen the mood.
The Big Six banks — namely, Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia, Bank of Montreal, Canadian Imperial Bank of Commerce and the National Bank of Canada — are expected to post moderate earnings growth overall for their first quarter, according to a Monday (Feb. 24) report from The Wall Street Journal (WSJ).
However, a possible trade war with the U.S. means that these banks will need to shore up capital to support elevated credit-loss provisions, or money set aside for loans that don’t get repaid.
“Several analysts have trimmed core earnings forecasts for the sector in anticipation of higher credit-loss provisions on currently performing loans,” the WSJ noted. “Analysts at RBC Capital Markets project total credit-loss provisions will increase about 32% on the prior quarter and about 70% year-over-year across all six banks, to 5.6 billion Canadian dollars ($3.95 billion). Higher provisions will eat into earnings for this quarter.”
On Feb. 1, President Donald Trump enacted a 25% tariff on imports from Canada and Mexico, as well as a 10% tariff on Canadian energy, but later placed a 30-day pause on the levy.
According to a Monday report from CNBC, Trump said he intends to resume the tariffs once the deadline expires next week.
When the tariffs were first announced, Canadian Prime Minister Justin Trudeau announced retaliatory tariffs that will impact U.S. beer, wine, bourbon, fruit, fruit juices, perfume, clothing, shoes, household appliances, sports equipment, lumber and plastics.
As PYMNTS noted at the time, industries reliant on cross-border trade are likely to be the worst affected by a trade war.
“The most immediate impact of tariffs is often felt in supply chains,” PYMNTS wrote. “Industries that rely on the seamless movement of goods across borders are particularly vulnerable. Tariffs, whether they are imposed on raw materials, intermediate goods or finished products, drive up the cost of production. For manufacturers, this often means higher prices for components, parts and materials sourced from countries involved in trade disputes.”
Consequently, businesses have scrambled to diversify their supply chains, shifting from a “just-in-time” to a “just-in-case” model to hedge against geopolitical risks and economic uncertainty.
A potential trade war has also made consumers uneasy, with consumer sentiment down nearly 10% from last month and about 16% lower than a year ago, according to February data from the University of Michigan’s latest Consumer Sentiment Index.