Gap third-quarter net profit rises
SAN FRANCISCO (Reuters) - Gap Inc (GPS.N) posted higher quarterly net profit on Thursday, topping Wall Street expectations, helped by lower inventory and cost cutting that boosted margins and offset a decline in sales.
The global apparel retailer, which operates the Gap, Old Navy and Banana Republic chains as well as online shoe seller Pipeline, also stood by its full-year earnings forecast.
Gap shares were unchanged after-hours. They had closed down nearly 6 percent at $9.51 in a broad stock market sell-off.
"There's no question the fourth quarter is going to be challenging," Chief Executive Glenn Murphy said on a conference call, adding that shoppers were beginning to notice product improvements at Gap and Old Navy.
Susquehanna Financial analyst Thomas Filandro called Gap's third-quarter results "impressive, given the environment and their same-store sales results."
"They've done an amazing job of navigating the environment and preserving capital, focusing on growing those gross margins, keeping the balance of a healthy business as they right-size the brands," Filandro said.
For the third quarter ended November 1, net income rose 3 percent to $246 million, or 35 cents per share, from $238 million, or 30 cents per share, a year earlier.
Sales fell nearly 8 percent to $3.56 billion from $3.85 billion, the San Francisco-based company said.
Analysts, on average, had expected earnings of 34 cents on sales of $3.55 billion, according to Reuters Estimates. The company predicted earnings of 33 cents to 35 cents per share.
Gap has been trying to dig itself out of a multiyear sales slump by improving its products and fine-tuning its image and target customers for its brands.
But like most U.S. retailers, Gap has been hurt as shoppers cut back on all but the most vital purchases such as food and gasoline in the economic downturn.
Also on Thursday, women's apparel chain New York & Co Inc MWY.N swung to a quarterly loss on falling sales, teen retailer Wet Seal Inc TSAI.O forecast a disappointing fourth quarter while posting a third-quarter profit from a year-ago loss, and men's apparel maker Perry Ellis (PERY.O) posted a lower profit, citing a weak retail environment.
"MORE COMPETITIVE"
At Gap, international sales, which represent about a tenth of total revenue, rose 9 percent in the quarter, but sales fell at North American Gap, Old Navy and Banana Republic stores. Gap's online division saw a 15 percent rise in sales.
Same-store sales, at outlets open for at least a year -- a key gauge of financial health -- fell 12 percent in the quarter. Continued...
