Gap posts 3% profit increase in second quarter
Gap Inc. reported second-quarter results Thursday that showed continued improvement at the apparel retailer, which is in the midst of an aggressive online and international expansion.
For the quarter that ended July 31, profit at the San Francisco company — parent to the Gap, Banana Republic and Old Navy brands — increased 3% to $234 million, or 36 cents a share, from $228 million, or 33 cents, in the year-earlier quarter. Analysts polled by Thomson Reuters had expected 35 cents.
Total sales were $3.32 billion, up from $3.25 billion a year earlier, and sales at stores open at least a year — known as same-store sales and considered an important measure of a retailer’s health — rose 1%. However, same-store sales at Gap brand stores in North America declined 4%.
Higher-end chain Banana Republic continued to see positive results from its more well-rounded mix of apparel after its merchandise became “too serious” in recent years, said Jack Calhoun, president of Banana Republic.
“We’re a brand that’s trying to deliver a well-balanced assortment across work, casual and going out,” he said in an interview Thursday. “We know it continues to be a difficult consumer spending environment out there, but we think we’re doing a good job at competing at all levels within that.”
Gap Inc., which operates about 3,100 stores around the world, has been focusing on growing its online and international presence, Chief Executive Glenn Murphy said in a statement.
In the second quarter, the company expanded its e-commerce reach from one country to 55 through international shipping, making Old Navy available for the first time to customers outside of North America.
The company also expects to launch dedicated e-commerce sites this month in Canada and Britain. By the end of the year, it plans to open stores in China, Italy and Australia.
On Thursday, Gap Inc. also announced that its board of directors had authorized a new $750-million share repurchase program, bringing the total share repurchase authorizations in fiscal 2010 to $1.75 billion.
The company reported its earnings after the markets closed.
During regular trading, its shares fell 27 cents, or 1.5%, to $17.71; in after-hours trading, shares were up about 3%.
Gap Inc. reiterated its guidance for the fiscal year, saying it expected earnings of $1.77 to $1.82 per share, in line with Wall Street estimates.
“They’ve improved their business quite a bit, but they’re also having a tough time with Gap’s core concept — they’ve been very promotional,” said Christine Chen, a retail analyst at Needham & Co. “I think it’s bad for the brand, but we are in a very promotional environment and they’re doing what it takes to drive traffic.”
andrea.chang@latimes.com
