Gap shares fell by more than 19% Friday in premarket trading after it cut FY adjusted EPS guidance. The clothing and accessory retailer missed the consensus estimates.

Gap reported a 44c loss per share in Q1, while analysts had expected a loss per shares of 14c. The net sales reached $3.48 trillion, which was higher than analysts expected of $3.46 billion.

Analysts expected a decrease of 9.93% in total comparable sales for Q1. However, they were 14% lower than the actual number. Analysts were expecting a decline of 3.2% in global Gap comparable sales. However, the 11% plunge was largely due to the drop in worldwide equivalent sales.

Gap reports that Old Navy comparable sales fell 22% in this period, which is 22% less than the 16.8% drop expected. Banana Republic reported comparable sales growth of 27%, exceeding the anticipated 11.8% increase. Analysts were expecting a 10% increase in sales for Athleta, but they were actually down by 7%.

Comparable to 35.3% consensus projected, Q1’s gross margin was at 31.5%.

“We are revising our fiscal 2022 outlook to reflect the impact of certain factors impacting our near-term performance, including execution challenges at Old Navy, an uncertain macro consumer environment, inflationary cost headwinds, and a slowdown in China that is impacting Gap Brand,” said Katrina O’Connell, Executive VP and CFO of Gap.

“We expect our performance to improve modestly in the back half of the year and accelerate as we enter fiscal 2023,” CFO said.

As part of the 350-store closing plan, Banana Republic and Gap stores will be closed in North America by 2022.

Morgan Stanley (NYSE:). Analyst Kimberly Greenberger has downgraded GPS stock from Equal Weight to Underweight with an $8.00 share price target. This is down from $13.00. After having downgraded GAP stock to UW in January, the analyst raised GAP shares to EQ in April.

“We move back to Underweight, as consistent, protracted misexecution against a likely decelerating macro backdrop & further industry headwinds could pressure earnings lower for longer,” Greenberger said in a client note.

Matthew Boss (NYSE: JPMorgan) Analyst downgraded Gap, from Neutral to Overweight, with a $9.00 price target from $11.00.

Michael Binetti, Credit Suisse analyst, reiterated his Neutral rating. He also reduced the price target from $13.00 to $10.00 per shares.

“We are disappointed, but not surprised with 1Q results and updated guide. With industry optics suggesting the low income consumer (ON’s core) is under pressure, we don’t expect an easy path to a re-rating for the multiple soon,” the analyst told clients.

By Senad Karaahmetovic