Raphael Stevens

Gap, which runs its eponymous brand as well as Banana Republic, Old Navy and Athleta, saw its gross margins improve thanks to reduced promotions and lower air freight expenses.
The mall retailer’s fiscal first-quarter revenue was largely in line with expectations.
The company’s net losses have narrowed but all four of its brands reported declining sales again.

The Gap logo is displayed at a Gap store on April 25, 2023 in Los Angeles, California.
Mario Tama | Getty Images

Gap reported another quarter of net losses and declining sales across its four brands but the retailer insisted it’s making progress — and has managed to significantly improve its margins, which sent shares surging in extended trading.
Here’s how the apparel retailer did in its fiscal first quarter compared with what Wall Street was anticipating, based on a survey of analysts by Refinitiv:

Earnings per share: 1 cent, adjusted, vs. a loss of 16 cents, expected
Revenue: $3.28 billion vs. $3.29 billion expected

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2 days ago

For the three-month period that ended April 29, the company’s net loss narrowed to $18 million, or 5 cents per share, from $162 million, or 44 cents a share, in the year-earlier period. On an adjusted basis, the company reported earnings of $3 million, or 1 cent per share. 
Sales dropped to $3.28 billion, down 6% from $3.48 billion a year earlier. 
Shares jumped more than 15% in after-hours trading on the improvement in gross margins.
Gap, which includes its namesake brand, Old Navy, Banana Republic and Athleta, has been without a CEO for nearly a year as it worked to restructure the business, understand its customers better and get back to profitability. 
The retailer said that work is well underway — and acknowledged it has long been needed.

“Consistent with what you’ve heard from us over the last few quarters, we continue to take the necessary actions to drive critical change at Gap Inc., to further improve the trajectory of our business and to get us back on a path to delivering consistent results,” interim CEO Bobby Martin told investors on an earnings call.
“I understand that we have surfaced these issues before, and what I would say is simply this work has been derailed for far too long and it is imperative that we get after it in earnest,” he said.
Last month, Gap told investors it will lay off about 1,800 employees, more than three times as many as the 500 layoffs it announced in September, as part of a broad effort to cut costs and streamline operations.
Between this year and last, the company has cut 25% of its headquarters roles, which has increased the number of direct reports each manager has from two to four and reduced management layers from 12 to eight, the company said. 
The cuts remove layers of red tape and bureaucracy that will allow Gap to be more nimble in its decision-making and focused on its creative efforts, the company said. 
In March, it also announced a major leadership shake-up. Athleta CEO Mary Beth Laughton left the company and its chief growth officer role was eliminated. Gap announced its chief people officer Sheila Peters would also be leaving, albeit at the end of the year. 
During an earnings call with investors, Martin said the search for a new CEO continues, but he didn’t share a timeline of when the job would be filled.
“When I took the role of interim CEO in July, I did not expect to still be speaking to you in our first-quarter earnings call,” said Martin. “But this only underscores how strongly the board is committed to appointing the right person as our next CEO, one that has passion, strong vision and customer obsession that will take this company forward.”
Martin said previously the next chief executive will be an external candidate.
In its most recent quarter, comparable sales were down 3% and store sales decreased 4% compared to last year. 
Online sales, which represented 37% of total net sales, also dropped 9% year over year, but the company said that was due to the fact that sales trends are getting more in line with pre-pandemic metrics. But digital sales are up 39% compared to the fiscal first quarter of 2019, the company added. 
In the year-earlier period, many retailers were still battling pandemic-related supply chain issues and it landed Gap with a glut of inventory the company had trouble selling because it was out of season or out of style. 
Gap, like other retailers, relied on promotions to clear that inventory, particularly at Old Navy, but in its most recent quarter, it was able to hold the line on discounts — and benefit from reduced air freight expenses that have led to better margins for retailers across the industry. 
Gross margins increased by 5.6 percentage points year over year to 37.1%, and improved on the prior quarter, too, when margins were 33.6%. 
The company attributed the bump in margins to lower air freight expenses and a slowdown in discounting, which was partially offset by ongoing inflationary costs. 

How Gap’s brands fared

Old Navy, which accounts for the majority of Gap’s revenue, saw net sales drop 1% to $1.8 billion and comparable sales down 1%. Sales were strong in its women’s and baby categories, but the gains were offset by softness in active and kids and an ongoing slowdown in consumer demand. Old Navy, which caters to a lower-income consumer, is more vulnerable to macroeconomic conditions. 

Gap reported $692 million in sales, a 13% drop year over year, and a 1% increase in comparable sales. Similar to Old Navy, the eponymous banner also saw strength in its women and baby categories, and softness in activewear and kids. Sales were also affected by Gap store closures, the company said. 

Banana Republic saw $432 million in sales, down 10% year over year. The company attributed the drop to an “outsized” 24% jump in sales in the year-ago period that was driven by a shift in consumer preferences as many returned to work and going out following Covid lockdowns. Comparable sales were down 8%.

Athleta is still missing the mark when it comes to what consumers are looking for. Net sales were down to $321 million, an 11% drop year over year, and comparable sales were off 13%. The sales dip was attributed to ongoing product acceptance challenges, including “misses” in color, print, pattern, silhouette and straying away from the brand’s “performance DNA.”

Gap is also continuing to improve its inventory levels, which were down 27% in the quarter at $2.3 billion compared to a year ago. 
The company is still having promotions and discounts, but they’re not denting margins like they were now that the inventory is cleaned up, said Gap finance chief Katrina O’Connell.
“The reduction in inventory has really allowed us to clean up the markdown piece of the business, which doesn’t add a lot of customer value, right? That’s just inventory that last year wasn’t responded to well by the consumer and we had to sell through given excess inventory, the wrong inventory,” O’Connell said on an earnings call.
“The margin benefits coming from cleaning up that markdown, what that’s allowing us to do is still promote, which is a better way to be offering value to the consumer, which is still important at this time.”
Across its brands, Gap has been conducting research to better understand its consumers so it can deliver products they want, regain market share and reverse the sales slumps.
Gap’s full-year outlook was largely unchanged from the forecast it gave in March. The company is expecting second-quarter net sales to decrease in the mid- to high single-digit range. 
For the full year, it continues to expect net sales to be down in the low to mid-single-digit range.
The outlook is partly affected by the company’s sale of Gap China. In the fiscal second quarter of 2022, net sales included $60 million from Gap China, and in fiscal 2022, it included $300 million in sales. 
Fiscal 2023 will also include a 53rd week, which is expected to boost sales by $150 million.
Gap expects gross margin to continue to rise and capital expenditures to come down to $500 million to $525 million, compared to a prior range of $500 million to $550 million. The drop is driven by a decision to open about five fewer Old Navy and Athleta stores during the fiscal year. 
The company plans to open a net 25 to 30 Old Navy and Athleta stores in the fiscal year, a third of which will be Old Navy. It expects to close 50 to 55 Gap and Banana Republic outposts, more than half of which will be Gap.
Read the full earnings release. More

Ford Motor will partner with Tesla on charging initiatives for its current and future electric vehicles in an unusual tie-up between the two rivals.
Under the agreement, announced by Ford CEO Jim Farley and Tesla CEO Elon Musk, current Ford owners will be granted access to more than 12,000 Tesla Superchargers across the U.S. and Canada starting early next year.
Ford’s next-generation of EVs will include Tesla’s charging plug, allowing owners of Ford vehicles to charge at Tesla Superchargers without an adapter.

Jim Farley and Elon Musk
Getty Images

DETROIT – Ford Motor will partner with Tesla on charging initiatives for its current and future electric vehicles in an unusual tie-up between the two rivals, CEOs of the automakers announced Thursday.
Under the agreement current Ford owners will be granted access to more than 12,000 Tesla Superchargers across the U.S. and Canada, starting early next year, via the use of an adapter. And, Ford’s next-generation of EVs — expected by mid-decade — will include Tesla’s charging plug, allowing owners of Ford vehicles to charge at Tesla Superchargers without an adapter, making Ford among the first automakers to explicitly tie into the network.

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The initiatives were announced by Ford CEO Jim Farley and Tesla CEO Elon Musk during a live, audio discussion on Twitter Spaces. They come as Ford attempts to ramp up production of its fully electric vehicles in an attempt to catch up to — or someday surpass — Tesla’s sales in the segment.
While Tesla still dominates the EV sector by far, Ford came in second in fully electric vehicle sales in the U.S. last year, notching sales of 61,575 electric vehicles.
Farley said the company is “totally committed” to a single U.S. charging protocol that includes the Tesla plug port, known as NACS. It’s unclear if Ford’s next-gen EVs will maintain the charging ports featured on current models, known as CCS. A Ford spokesman said the company has “this option available to us but have no news to share today.”
A separate Ford spokesman told CNBC that pricing for charging “will be competitive in the marketplace.” The companies will disclose further details closer to a launch date anticipated in 2024.
Tesla previously discussed opening its private network to other EVs. White House officials announced in February that Tesla committed to open up 7,500 of its charging stations by the end of 2024 to non-Tesla EV drivers. Previously the company’s chargers in the U.S. were mostly used by and made to be compatible with Tesla’s EVs.

In Tesla’s first-quarter shareholder deck, the company disclosed that it has roughly 45,000 Supercharger connectors worldwide at 4,947 Supercharger Stations. The company does not disclose chargers by country or revenue from the devices. It includes revenue from its Supercharging stations under a “services and other” segment.
The Twitter Spaces event between Farley and Musk Thursday marks the latest interaction between the two executives, who have a unique rivalry. They have each expressed admiration for the other, despite their companies competing directly.
Ford notably beat Tesla to the pickup segment beginning production of its F-150 Lightning, the electric version of its consistently popular trucks, in April 2022. Ford also heavily benchmarked the Tesla Model Y for its Mustang Mach-E crossover and followed Tesla in price cuts of the electric crossovers.
But Musk, who leads Tesla, SpaceX and Twitter, has repeatedly praised Ford as a historic American company, lauding its ability to avoid bankruptcy, unlike its crosstown rivals General Motors and Chrysler during the Great Recession.
Such flattery was prevalent during the Thursday call: “Working with Elon and his team, I’m really excited for our industry and for the Ford customers,” Farley said. Musk later reciprocated the feelings: “It’s an honor to be working with a great company like Ford,” he said.
Farley prodded Musk a bit, asking about the long-delayed new version of the company’s first vehicle, the Roadster. Musk teased a Roadster refresh back in the fall of 2017. He promised it would have a 620-mile range per charge and three motors, among other features.
Today, he reiterated Thursday, the new version of the Roadster is still not even completely designed.
Earlier Thursday, Farley commended Tesla on its charging network during a Morgan Stanley conference, saying that while Ford has created its own charging products for its commercial customers, automakers should consider collaborating on charging infrastructure for the general public.
“It seems totally ridiculous that we have an infrastructure problem, and we can’t even agree on what plug to use,” Farley said, noting that Tesla’s charging plug is different from that used by other automakers. “I think the first step is to work together in a way we haven’t, probably with the new EV brands and the traditional auto companies.” More

The Food and Drug Administration granted full approval to Pfizer’s Covid antiviral pill Paxlovid for adults who are at high risk of getting severely sick with the virus.
Paxlovid is specifically advised for the treatment of mild to moderate coronavirus in adults older than 50 and people who suffer from certain medical conditions that place them at a higher risk of ending up in the hospital or dying from Covid-19.
Pfizer and the FDA view the treatment as an important complementary tool to vaccination that can help high-risk Americans manage their Covid infections and ultimately save lives. 

Jennifer Lorenzini | Reuters

The Food and Drug Administration on Thursday granted full approval to Pfizer’s Covid antiviral pill, Paxlovid, for adults who are at high risk of getting severely sick with the virus.
Paxlovid is specifically advised for the treatment of mild to moderate Covid in adults older than 50 and people who suffer from certain medical conditions that place them at a higher risk of ending up in the hospital or dying from Covid.

That includes those who have diabetes, heart conditions, cancer or a weak immune system. 
As many as three-quarters of adults in the U.S. are at risk of severe Covid.
“Today’s approval demonstrates that Paxlovid has met the agency’s rigorous standards for safety and effectiveness, and that it remains an important treatment option for people at high risk for progression to severe COVID-19, including those with prior immunity,” Dr. Patrizia Cavazzoni, director for the FDA’s Center for Drug Evaluation and Research, said in a press release.
The FDA first made Paxlovid available in December 2021 under emergency use authorization for high-risk individuals ages 12 and up. Under that designation, the FDA quickly approved the treatment based on preliminary clinical trial data. 
The FDA’s latest decision means there is now extensive clinical data indicating Paxlovid is safe and effective.

The treatment consists of two medications: nirmatrelvir, which blocks a key enzyme that the Covid virus needs to replicate, and ritonavir, which boosts the first medication’s ability to fight the infection. 
Both Pfizer and the FDA view the treatment as an important complementary tool to vaccination that can help high-risk Americans manage their Covid infections and ultimately save lives. 
FDA researchers estimated, based on Covid rates in January, that Paxlovid could “lead to 1,500 lives saved and 13,000 hospitalizations averted each week” in the U.S.
But it’s unclear how many people will take the treatment later this year. 
About 4 million doses of Paxlovid are available at pharmacies and health care providers nationwide for free, according to the Health and Human Services Department. In addition, the U.S. government has a stockpile of 9.6 million doses.
Once that stockpile runs out, the government expects to shift the distribution of Paxlovid to the commercial market. 
That means Pfizer will sell Paxlovid directly to health-care providers at a price the company hasn’t disclosed. Paxlovid is priced at about $530 per course now. 
Pfizer, which saw Paxlovid sales jump to nearly $19 billion in 2022, expects revenue from the drug to drop 58% in 2023. 
In March, an independent panel of advisors to the FDA recommended the treatment based on three of Pfizer’s clinical trials.
One trial examined high-risk adults who were unvaccinated and had no prior Covid infection. 
That trial found Paxlovid reduced the risk of hospitalization or death by 86% in adults treated within five days of their first symptoms, and 89% in those treated within three days, according to an FDA review of the company’s data.
No major safety concerns were identified in the trial, the review said, though the agency flagged 137 medications that may lead to serious adverse reactions if they interact with Paxlovid. 
The FDA said the most common drugs that caused safety issues were immunosuppressants, which are often used to treat HIV and organ transplant patients. 
The FDA’s office of surveillance and epidemiology recorded 271 reports of serious adverse events potentially related to drug interactions with Paxlovid, including 147 hospitalizations and six deaths, as of late January. 
FDA staff said those events could potentially be avoided by adjusting the dose of certain drugs, increasing patient monitoring and ensuring that product labeling informs prescribers and patients of potential drug interactions. 
For some doctors, another area of concern is Paxlovid “rebound cases.” That’s when patients who take the treatment see their Covid symptoms return or test positive shortly after they initially recover.
Reports of those cases cropped up not long after Paxlovid first entered the market.
Both President Joe Biden and his former chief medical advisor Dr. Anthony Fauci seemingly recovered from Covid after taking the antiviral cocktail but tested positive again soon after recovering.
An FDA review of Pfizer’s clinical trials found overall rates of rebound ranged from 10% to 16%, “with no evidence of a higher rate of symptom rebound or moderate symptom rebound” in patients who received Paxlovid compared with patients who received a placebo.
Those results also held regardless of patients’ risk of severe disease, or whether the omicron variant or an earlier strain of the virus was dominant, according to the FDA review.
Correction: The U.S. has about 4 million doses of Paxlovid available at pharmacies and health care providers nationwide. A previous version of this story misstated the figure. More

Sex offender Jeffrey Epstein paid school tuition for the children of then-governor of the U.S. Virgin Islands, whose wife made efforts to enable student visas and a work license for young women connected to Epstein, according to a court filing by JPMorgan Chase.
Those tuition payments by Epstein allowed then-Gov. John de Jongh Jr. “to funnel additional money to his political campaigns,” JPMorgan said in the filing in U.S. District Court in Manhattan.
The former governor’s wife, Cecile de Jongh worked for Epstein, managing his companies in the territory.
JPMorgan CEO Jamie Dimon is due to be deposed Friday in a lawsuit by the Virgin Islands alleging the bank enabled sex trafficking by Epstein.

U.S. Virgin Islands’ former Gov. John P. de Jongh participates in a meeting dealing with health care at the Southern Governors’ Association convention in Little Rock, Arkansas, Aug. 16, 2014.
Danny Johnston | AP

Sex offender Jeffrey Epstein paid school tuition for the children of then-governor of the U.S. Virgin Islands, whose wife made efforts to secure student visas and a work license for young women connected to Epstein, according to an updated court filing Thursday by JPMorgan Chase.
Those tuition payments, whose duration and amounts were not revealed, allowed then-Gov. John de Jongh Jr. “to funnel additional money to his political campaigns,” JPMorgan said in the filing in U.S. District Court in Manhattan.

Epstein also “offered to fund Governor de Jongh’s defense in the Governor’s criminal case,” where the then-governor was charged in 2015 in connection with the use of public funds to make security improvements at his private residence, according to the filing. Those charges were dropped in early 2016 by the Virgin Islands Department of Justice.
JPMorgan alleges Epstein’s generosity was part of his broader effort to build sway on the islands.
The filing is part of the bank’s defense of a civil lawsuit by the U.S. Virgin Islands alleging JPMorgan facilitated Epstein’s sex trafficking of young women. Epstein, who was a JPMorgan customer between 1998 and 2013, owned two private islands in the territory and abused multiple young women at his residence on one of those islands.
JPMorgan denies wrongdoing in the case.
JPMorgan CEO Jamie Dimon is due to be deposed Friday for the Virgin Islands’ lawsuit, as well as for a similar one filed against the bank by an accuser of Epstein.

“Lest there be doubt that Epstein’s goal was to gain influence, First Lady [Cecile] de Jongh explicitly advised Epstein on how to buy control of the USVI political class,” the filing says.
The document also refers to one time when Cecile de Jongh was “asking Epstein what visas the ‘ladies’ have and trying to arrange English as a Second Language classes for them.”
Former Gov. de Jongh served as Virgin Islands governor between 2007 and 2015.
Cecile de Jongh worked for Epstein, managing his companies in the territory. She made $200,000 in 2007 alone, the filing notes.
CNBC has reached out to the de Jonghs for comment through an asset management firm in the Virgin Islands where the former governor is a director.
The filing was first docketed Tuesday with extensive redactions, but it was refiled Thursday, with some details about former Gov. de Jongh and Cecile now visible. Also visible are allegations related to current Virgin Islands Gov. Albert Bryan Jr. and his immediate predecessor in that office, Kenneth Mapp.
Bryan, who is due to be deposed June 6 in the case, suggested schools to which Epstein should donate $50,000, the filing said. Bryan also asked $30,000 go to the Virgin Islands Little League, according to the document.
Portions of the filing that were visible Tuesday said the government of the Virgin Islands was “complicit in the crimes of Jeffrey Epstein.”
JPMorgan said Epstein — who died in 2019 by a jailhouse suicide while awaiting trial on federal sex trafficking charges — gave top officials in the territory money, advice and favors as they looked the other way when he trafficked young women there.
A spokesperson for the Office of the Attorney General of the Virgin Islands, in an emailed statement responding to the updated filing, said, “JPMorgan Chase facilitated Jeffrey Epstein’s abuse, and should be held accountable for violating the law.”
“This is an obvious attempt to shift blame away from JPMorgan Chase, which had a legal responsibility to report the evidence in its possession of Epstein’s human trafficking, and failed to do so,” the spokesperson said.
The document calls Cecile de Jongh, who managed Epstein’s companies there when she was first lady, “a ready partner” in helping Epstein transport young women to exploit in the Virgin Islands, where he maintained a home.
The bank alleged Cecile de Jongh was “Epstein’s primary conduit for spreading money and influence throughout the USVI government.” The filing said she emailed him in 2011 proposed language for a bill in the Virgin Islands legislature that would update sex offender monitoring laws.
“This is the suggested language; will it work for you?” she asked in that email, according to the filing.
The document also said Epstein, who was a registered sex offender due to his conviction in Florida state court in 2008 for soliciting sex from a minor, replied, “We should add out of country for more than 7 days, otherwise I could not go for a day trip to Tortola, at the last minute.”
JPMorgan alleged Epstein, despite receiving “lucrative tax incentives” and “lax enforcement” of his sex offender status from the Virgin Islands, “still could not freely transport and exploit young women without assistance from USVI government officials.”
The filing said Cecile de Jongh “arranged for Epstein to meet with a local immigration lawyer to assist at least one” young woman who needed a visa to visit the American territory.
Cecile de Jongh also “contacted the University of the Virgin Islands … to find out whether three young women could enroll there to obtain student visas,” according to the filing.
“Perhaps cognizant of the risk in having a registered sex offender sign the letter, First Lady de Jongh wrote to Epstein that he should think about whether ‘[he] should sign [the letter] or one of us,'” the document said.
“Ultimately UVI structured a bespoke class to enroll victims and provide cover for their presence in the territory — the same year Epstein donated $20,000 to the university through one of his companies,” the filing said.
“In addition to visas, some of the young women Epstein brought to the island also neededemployment,” the filing noted.
The document said when one of those women needed a dental license, “First Lady de Jongh reached out to the Director for the Office of Professional Licensure and Health Planning at the USVI Department of Health regarding a ‘new practice act’ that would have ‘significant changes and allowances for reciprocity.'”
“The Director wrote to Ms. de Jongh that once the act went before the Senate Committee she would have a ‘clearer idea on what [the young woman’s] options are moving forward,'” it said.
The filing alleged Cecile de Jongh also reached out to contacts in the attorney general’s office and solicitor general’s office about the new rules.
“Ultimately, First Lady de Jongh was successful,” the filing said. “The young woman eventually setup a local dental practice in the USVI and shared an office with Epstein’s companies.”
In detailing claims Cecile advised Epstein on how to use his money to control politicians in the Virgin Islands, the filing says Epstein, at her suggestion, “explored paying monthly retainers to USVI politicians to ensure their ‘loyalty and access.'”
“First Lady de Jongh suggested that Epstein ‘consider putting Celestino [White] on some sort of monthly retainer. That is what will get you his loyalty and access,'” said the document.
White was a Virgin Islands senator.
The filing also details how Epstein met often with the leadership of the Virgin Islands Port Authority, which leased hangar space to him at its airport, where women were brought in for Epstein.
Cecile de Jongh at one point asked Epstein, on behalf of her husband, the governor, “if he would support” the bid by then-Sen. Carlton Dowe to return to the Port Authority, the filing said.
Dowe, according to the message from Cecile, would be a “good person for us” there, the filing said.
“Based on his government connections, when traveling through the USVI’s airport accompanied by young women as a registered sex offender, Epstein could count on his ‘great relationship’ with the officials there to avoid scrutiny or detection,” the filing said.
“In sum, in exchange for Epstein’s cash and gifts, USVI made life easy for him,” JPMorgan’s filing said.
The document added, “The government mitigated any burdens from his sex offender status. And it made sure that no one asked too many questions about his transport and keeping of young girls on his island.” More