Gap Inc. (GPS.N) has relied on Old Navy to prop up quarterly results, but the value chain didn’t throw it a life jacket last quarter.

• Gap posted same-store sales, a key measure, that were flat, missing analysts’ estimates for a gain of 1.1 per cent. Both the Gap brand and Old Navy missed projections on that key performance measure.

Key Insights

• Those sales results portend a worsening outlook for the full year as the retailer cut its outlook for earnings per share to as much as US$2.60, from a previous forecast of as much as US$2.70.
• Gap has struggled with declining mall traffic, made operational missteps and seen disappointing growth. The Gap brand in particular has failed to impress, and the company is relying more and more on Old Navy and its Athleta chain for growth.
• In a bright spot, the Banana Republic brand posted same-store sales that topped estimates.

Market Reaction

• Gap shares were little changed in after-hours trading. They had sunk 28 per cent this year through Tuesday’s close.
• The stock dropped earlier Tuesday after Morgan Stanley signaled caution toward soft-line chains with exposure to China, including Gap, amid swelling worries about rising tariffs.