Clothing retailer Gap Inc. boosted its fiscal first-quarter profit by 40% despite a persisting sales slump that seems likely to deepen this summer as consumers scrimp on fashion to help offset rising gasoline and food bills.
The San Francisco-based merchant said Thursday that it earned $249 million, or 34 cents a share, during the three months that ended May 3. That compared with net income of $178 million, or 22 cents, a year earlier. Revenue fell 5% to $3.38 billion.
The earnings beat the average estimate of 30 cents a share among analysts polled by Thomson Financial. The revenue missed analysts' target of $3.42 billion.
"We delivered solid earnings growth in a difficult environment," Gap Chairman Glenn Murphy said. "Looking ahead, we are focused on bringing compelling product and shopping experiences to our customers while managing costs tightly. We believe this approach is proving even more prudent given the current economic conditions."
Gap shares gained 22 cents to $18.29 in Thursday's regular session, then added 23 cents in after-hours trading after the earnings release.
In a telling sign of Gap's misery, sales at stores open at least a year dropped 11% -- the company's worst erosion yet during a downturn that has lasted nearly four years.
Gap's so-called same-store sales have now declined in 15 consecutive quarters, by far the retailer's worst stretch of trouble since co-founders Donald and Doris Fisher opened the first store in 1969.
Since then, Gap has become a shopping center anchor with 3,177 stores worldwide. Besides Gap, the company also owns the Old Navy and Banana Republic chains.