November 21, 2014 / 12:25 AM / in 3 years

Gap cuts profit forecast as demand slows for Old Navy brand

(Reuters) - Apparel retailer Gap Inc cut its full-year earnings forecast as sales at the Gap brand continued to fall and demand for the cheaper Old Navy clothing slowed.

The company’s shares fell 4.4 percent in extended trading.

Comparable-store sales fell 5 percent at Gap in the third quarter ended Nov. 1 while sales were flat at Banana Republic.

Comparable sales growth at Old Navy stores slowed to 1 percent from 4 percent in the preceding quarter.

Old Navy brand was Gap’s strong point in North America even when demand for its premium brands cooled.

A shopper walks down Fifth Avenue carrying a Gap shopping bag in New York, in this file photo taken October 8, 2009. REUTERS/Lucas Jackson/Files

The company cut its earnings forecast to $2.73-$2.78 per share from $2.95-$3.00 per share for the year ending February 2015.

Apparel sales in North America have been slowing as retailers slash prices to attract shoppers at a time when consumers cut back on discretionary spending.

Gap’s net income rose to $351 million, or 80 cents per share, in the third quarter from $337 million, or 72 cents per share, a year earlier.

The company said net sales fell slightly to $3.97 billion from $3.98 billion from a year earlier.

Analysts on average had expected a profit of 79 cents per share and revenue of $4.04 billion, according to Thomson Reuters I/B/E/S.

The company’s shares closed at $40.14 on the New York Stock Exchange on Wednesday.

Reporting by Ramkumar Iyer and Nayan Das in Bangalore; Editing by Don Sebastian

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