Benzinga | Aug 27, 2021 07:54AM EDT

Investors Cheer Gap Q2 Earnings Beat, Raised FY21 Outlook

* Gap Inc (NYSE:GPS) reported second-quarter FY21 sales growth of 28.6% year-on-year and 5% from Q2 FY19, to $4.21 billion, beating the analyst consensus of $4.12 billion.

* Due to the impact of COVID-related store closures last year, financial comparisons for Q2 were made primarily against 2019.

* Comparable sales were up 3% Y/Y and rose 12% versus 2019.

* Compared to Q2 2019, Old Navy Global sales increased 21%, Gap Global declined 10%, Banana Republic Global fell 15%, and Athleta rose 35%.

* Online sales grew 65% versus Q2 FY19, constituting 33% of total sales, while Store sales declined 11%.

* Gross profit for the quarter rose 17% to $1.82 billion from Q2 FY19, with the margin expanding 440 basis points to 43.3%.

* The adjusted operating margin expanded 190 basis points to 10.2% from Q2 FY19.

* The company held $2.4 billion in cash and equivalents as of July 31, 2021.

* Net cash provided by operating activities for the six months totaled $792 million, with a free cash flow of $523 million as of July 31, 2021.

* Adjusted EPS of $0.70 beat the analyst consensus of $0.43.

* Outlook: Gap raised FY21 Adjusted EPS to $2.10 - $2.25 (prior $1.60- $1.75) versus the consensus of $1.78.

* Gap expects net sales growth to be about 30% (prior outlook for low-to mid-twenty percent range) versus 2020. The outlook represents sales of $17.94 billion versus the consensus of $17.14 billion.

* Price Action: GPS shares are trading higher by 9.11% at $28.75 on the last check Friday.