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Return to Basics Helps Gap Post Strong Sales in April

Times Staff Writer

Gap Inc. stood out as one of the few major retailers Thursday to report positive sales results for April, posting a double-digit increase that reflected continued gains from its refocused attention to basic apparel and marketing.

Other large U.S. retailers, including Wal-Mart Stores Inc., J.C. Penny Co., Sears, Roebuck & Co. and Kohl’s Corp., missed their sales marks despite expectations that the Easter holiday and a quick end to the Iraq war would spur consumer spending.

Analysts said unseasonably cool weather and worries about the job market kept shoppers out of stores in April.

Sales were particularly weak at department store chains and at major retailers of shoes and furniture. Drugstores and discounters fared better, but Wal-Mart, the world’s largest retailer, reported slightly lower-than-expected sales at stores open at least a year, a key indicator known as same-store sales.

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Apparel store sales, meanwhile, showed a big jump in April, led by Gap, the nation’s largest specialty apparel chain.

The San Francisco-based retailer’s sales jumped 22% to $1.2 billion for the four weeks ended Saturday. Same-store sales climbed 20%, in contrast to a 24% drop in the same period a year earlier. All three divisions -- Gap, Banana Republic and Old Navy -- posted double-digit increases in same-store sales.

On Thursday, Gap raised its first-quarter earnings forecast to 19 to 22 cents a share, much higher than the 11 cents most analysts were expecting. Shares reached a 52-week high Thursday, gaining 68 cents to close at $17.28 on the New York Stock Exchange.

“In tough times, consumers revert back to the basics and watch where their dollars are going,” analyst Jennifer Black of Wells Fargo Securities said about Gap’s strong results.

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Executives at Gap, which operates more than 4,200 stores, said more goods sold at regular prices and improved margins for marked-down items helped boost sales.

April marked Gap’s seventh straight month of same-store sales growth. The company had struggled to find its identity in recent years as it pushed aside casual wear and stocked trendier clothes. In the last year, however, Gap began to return to its basics, filling stores with khakis, jeans and cotton T-shirts. At the same time, Gap boosted spending on print and TV advertising.

“They have focused on better quality and narrower selections” in all three divisions, Black said. “They have gone back to the basics, which is what Gap has been known for.”

Sales at major apparel stores rose 6.7% in April from a year earlier -- more than double the percentage growth for chain stores overall, according to a report Thursday by the Bank of Tokyo-Mitsubishi.

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Not all clothing retailers were celebrating the arrival of spring.

Wet Seal Inc., the Foothill Ranch merchant of clothing for teenage girls and young women, said April sales fell 12.8% to $40 million, bringing sales in its fiscal first quarter to $123.6 million, a 21% decline from the year-earlier period. Sales at stores open at least a year tumbled 16.9% in April, compared with a 4.7% decline in April 2002.

It was the third consecutive month that same-store sales improved from the previous month, but the turnaround is going slower than expected, said Chairman Irving Teitelbaum. He said Wet Seal now expects to lose 27 to 31 cents a share in the just-completed quarter.

Industry analysts were expecting the company to lose about 25 cents a share. Wet Seal shares fell 23 cents, or 2.6%, to $8.73 on Nasdaq.

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Times wire services were used in compiling this report.


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