Gap December same-store sales fall 6 percent

NEW YORK (Reuters) - Gap Inc. (GPS.N) said on Thursday its sales at stores open at least a year fell 6 percent in December but said merchandise margins were "significantly above" the prior year.

Analysts, on average, had been expecting the San Francisco-based clothing retailer to post a same-stores sales decrease of 2.4 percent, according to Reuters Estimates.

Gap, which runs Banana Republic, Old Navy, and its namesake Gap stores, said total sales for the five weeks ended January 5 fell 6 percent to $2.20 billion from $2.34 billion a year earlier.

Same-store sales, a key gauge of retail performance, fell 9 percent and 8 percent, respectively, at Gap and Old Navy stores in North America. They fell 1 percent at Banana Republic, the company's more upscale chain.

The company has been improving its merchandise as it tries to control its inventory to keep from diluting its profit margins.

"However, we did not sell through as much inventory as we anticipated, and we'll focus on clearing through remaining holiday product in January," acting Chief Financial Officer Sabrina Simmons said in a statement.

Gap is in the midst of a turnaround to lure back shoppers who gravitated to other retailers over the past few years for their casual apparel. Hardest hit have been Gap and Old Navy stores, whose competition includes Target Corp (TGT.N), Kohl's Corp (KSS.N) and Abercrombie & Fitch (ANF.N).

(Reporting by Alexandria Sage, editing by Dave Zimmerman)