Gap Profit Outlook Sends Stocks Higher

Gap Inc., the nation’s largest apparel retailer, said it expects profit in its fiscal first quarter to top estimates after its April sales declined less than expected.

Its stock jumped 12.5% on Thursday.

The company said it will post earnings for the quarter ended Saturday of 12 cents or 13 cents a share. Analysts on average were expecting 11 cents, according to First Call/Thomson Financial. Profit was 27 cents a year earlier.

Sales are up 14% to $3.2 billion, led by women’s clothing, the San Francisco-based company said.

In March, Gap estimated its first-quarter earnings in a range of 10 cents to 15 cents a share, which at that time was below analysts’ consensus estimate of 20 cents.

Television advertising helped spur demand for low-rise jeans and halter tops at Gap’s Old Navy chain, and customers picked up more handbags, belts and printed spring and summer clothing at Gap and Banana Republic stores, the retailer said.

Sales at stores open at least a year fell 2% in April. Some analysts had forecast a decline of as much as 10%.

Chief Financial Officer Heidi Kunz said same-store sales still may decline in the fiscal second quarter, but the retailer hopes for improvement over the first quarter’s 7% decline.

Old Navy sold more summer clothing in April than expected, which means the stores began this month with a higher-than-planned inventory of spring leftover items, Kunz said.

The unit also is “challenged” by a lack of television ads in May, and its profit margin may be hurt, she said.

Shares of Gap, which have gained 27% this year, rose $3.61 to close at $32.41 on the New York Stock Exchange. The company will report final results for the quarter May 17.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Gap’s Rebound

Gap Inc. shares jumped 12.5% Thursday after the company said earnings likely will exceed forecasts because of better-than-expected sales in April.

Gap, weekly closes and latest on the NYSE

Thursday: $32.41, up $3.61

Source: Bloomberg News