About six months into the top job at Gap (GPS), Richard Dickson finds himself settled in and ready to take a crack at reinventing the mall-based retailer.

"We've got some really great demonstration of early signs of brand reinvigoration. And the efforts that we've been making on running a better business, operational and financial rigor, are showing up in the numbers," Dickson told Yahoo Finance by phone on Thursday as Gap posted much-better-than-expected Q4 earnings.

After a lengthy search, Gap named the former Mattel (MAT) COO as CEO, effective August 2023. Dickson, who sat on Gap's board before the appointment, was one of the Mattel executives behind the resurgence of Barbie, helping bring the doll to movie theaters in 2023.

Since taking over, Dickson has been on the road, visiting distribution centers and stores while meeting with top decision-makers at the retailer. The group diagnosed long-running issues (clunky website, less-than-cool products, supply chain inefficiencies) that have plagued the company's performance and stock price. Shares rose over 4% in Friday trading.

Gap's overall results for the holiday quarter show Dickson and his mostly new leadership team have a lot of work to do, though signs of improvement have emerged (particularly in Old Navy's sales trends and Gap's margins).

"This is not a portfolio with challenges that happened overnight, and we're not going to turn it overnight," said Dickson. "But you're starting to see where the new leadership and prioritization is starting to show up."

Here's how Gap performed on its earnings day:

The earning rundown

• Net sales: +1% year over year to $4.3 billion vs. $4.21 billion estimate

• Comparable sales:

  • Old Navy: +2% compared to -7% last year, vs. +2.75% estimate

  • Banana Republic: -4% compared to -3% last year, vs. -4.16% estimate

  • Gap: +4% compared to -4% last year, vs. +1.2% estimate

  • Athleta: -10% compared to -5% last year, vs. -10.9% estimate

• Gross margin: 38.9% compared to 33.6% last year, vs. 35.9% estimate

• Diluted EPS: $0.49 vs. $0.23 estimate

What else caught our attention

• No excess clothing: Inventory levels fell 16% from the prior year.

• Guidance:

  • Q1 24 net sales: Roughly flat year over year at $3.3 billion, vs. $3.27 billion estimate

  • Q1 24 gross margin: About 38.2% compared to 37.2% a year ago

  • 2025 net sales: Roughly flat year over year at $14.9 billion, vs. $14.88 billion estimate

  • 2025 gross margin: About 39.3% vs. 38.8% a year ago

• Jefferies analyst Corey Tarlowe on the quarter: "Improved results at Gap and Old Navy continued while Banana Republic and Athleta witnessed negative comps. Importantly, Gap and Old Navy accounted for ~77% of 4Q enterprise revenue, and continue to command significant market share in select categories, while management believes Banana Republic's turnaround story remains challenged, and as Athleta resets. That said, we still view Gap's turnaround story in the early innings and remain on the sidelines."

Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter/X @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email [email protected].

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