Gap’s Sales Fall 2% in October

Gap Inc. on Wednesday issued another profit warning, saying same-store sales in October dropped 2% as it discounted back-to-school and other slow-selling items to make way for holiday merchandise. But investors bid the stock higher in late trading, suggesting belief that the worst is over for the retailer.

October was a “big clearance month” for the nation’s largest apparel chain, which expects a “significant” decline in gross margin for the third quarter ended Oct. 28, Chief Financial Officer Heidi Kunz said. As a result, earnings are expected to be 20 to 22 cents a share, she said.

San Francisco-based Gap, owner of Gap, Old Navy and Banana Republic chains, was expected to earn 23 cents a share, the average estimate of analysts surveyed by First Call/Thomson Financial. The estimate once was 41 cents, before Gap lowered its expectations in August.

Forecasts for October sales at stores open at least a year ranged from a gain of 1% to a decline of 3%.

Gap made its announcement after the close of regular U.S. trading. Its shares fell $1.38 to close at $24.44 on the New York Stock Exchange in regular trading, but rose to $25.75 in after-hours activity. The stock has fallen 47% year to date.