Gap Inc (GPS.N) posted a bigger quarterly profit on Thursday and quelled fears of a possible slowdown ahead of the holiday season as the retailer raised its profit view for the year, sending its shares up 3 percent after the bell.
The owner of the Gap, Old Navy and Banana Republic chains expects to earn between $2.20 to $2.25 a share, up from its August forecast of $1.95 to $2.
Wall Street was expecting it to make $2.27 a share, according to analysts surveyed by Thomson Reuters I/B/E/S.
"When you're giving guidance, what's the point of being wrong on the upside? I think they are giving conservative guidance," said retail consultant Jan Kniffen.
"The stock's traded up because people were concerned about a slowdown in sales last month and thought it might be affecting their quarterly numbers," he said.
The company missed October same store sales estimates, after topping them for many months before that.
Gap has staged a turnaround after a decade of critics derided its fashions as boring and it lost out to rivals such as Zara parent Inditex SA (ITX.MC) and homegrown competitors such as Forever21.
Banana Republic's tie-in with television show Mad Men was a big success. Redoing Gap's classic Khakis in bright colors proved to be a crowd pleaser.
The company said all three brands posted positive comparable sales in North America, with Old Navy rising 9 percent.
For the third quarter, Gap earned $308 million, or 63 cents a share, compared with $193 million, or 38 cents a share, in the same quarter last year. Analysts were expecting the company to earn 63 cents.
Sales for the third quarter ended October 27 rose 8 percent to $3.86 billion.
Gap shares were trading up at $34.21 after the bell. They closed at $33.26 Thursday on the New York Stock Exchange.
(Reporting by Nivedita Bhattacharjee in Chicago. Editing by Andre Grenon and David Gregorio)