February 26, 2015 / 9:25 PM / 4 years ago

Gap expects dollar, port delays to hurt profit this year

(Reuters) - Apparel retailer Gap Inc (GPS.N) forecast a drop in full-year profit, citing a strong dollar, shipment delays due to disruptions at U.S. West Coast ports and declining sales at its flagship Gap brand.

Passers-by walk next to a Gap store in Broomfield, Colorado February 27, 2014. Gap, Inc. will announce their quarterly results on Thursday. REUTERS/Rick Wilking

Shares of the company, which also approved a $1 billion share buyback program, rose 3 percent in after-market trading on Thursday.

The company said it appointed a new design chief for Gap, the latest move in its efforts to revive the brand whose popularity has waned in recent years as shoppers favor fast-fashion brands such as Zara and Forever 21.

The company named Wendi Goldman as executive vice president of Gap’s product design and development team, a month after it eliminated the role of brand creative director.

Goldman has previously worked at Victoria’s Secret maker L Brands Inc (LB.N) as co-president.

“I made a very quick change with senior leadership ... We were not seeing the performance improvement in the (Gap) business that we needed to see,” Chief Executive Art Peck said on his first conference call as CEO of the company.

Retailers with strong international presence have also been hit by a stronger dollar.

Gap, which gets about 22 percent of its sales from overseas markets, said it expected a strong dollar to reduce full-year profit by about 16 cents per share.

The dollar is forecast to gain across currencies this year as the U.S. economy gathers steam. It is expected to rise nearly 10 percent in 2015 after gaining 13 percent in 2014.

The company said it expects merchandise delays due to labor issues at West Coast ports to reduce full-year profit by about 13 cents per share.

U.S. retailers are bracing for shipment delays as it may take as much as two months for the congestion at the ports to clear even after a tentative labor agreement on Feb. 20.

Gap said it expects to earn $2.75-$2.80 per share for the year ending January 2016, lower than the average analyst estimate of $2.81, according to Thomson Reuters I/B/E/S.

Gap reported a profit of $2.87 per share for the year ended Jan. 31.

Fourth-quarter net income rose 4 percent to $319 million, or 75 cents per share.

Revenue rose 2.8 percent to $4.71 billion. Overall comparable sales rose 2 percent.

Reporting by Ramkumar Iyer in Bengaluru; Editing by Sriraj Kalluvila and Saumyadeb Chakrabarty

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