Gap posts 19% profit drop in second quarter
Apparel giant Gap Inc. had another weak quarter, reporting a 19% decline in profit and a slump in sales at stores open at least a year.
The San Francisco company — parent to the Gap, Banana Republic and Old Navy chains — said Thursday that its fiscal second-quarter profit fell to $189 million, or 35 cents a share, from $234 million, or 36 cents, a year earlier.
Sales at stores open at least a year, known as same-store sales and considered an important measure of a retailer’s health, fell 2%.
Major divisions Gap North America, Banana Republic North America, Old Navy North America and International all posted the same or worse same-store sales results than in the second quarter of 2010.
Total sales rose 2% to $3.39 billion.
The company attributed the drop in profit to rising costs and deep markdowns at its stores; Gap’s near-constant deals have worried analysts, who say shoppers have become trained to wait for discounts and won’t pay full price.
“Despite a difficult quarter, we still delivered a net sales improvement, and I continue to believe we have far greater opportunities than challenges ahead of us,” Chief Executive Glenn Murphy said in a statement. “Every brand, division and geography is focused on what matters most.”
Christine Chen, a retail analyst at Needham & Co., said in a recent interview that although Gap has had success with its jeans and black-pants lines, its tops aren’t resonating with shoppers. Moreover, the company continues to have trouble convincing customers that its clothes and stores are trendy.
“That’s something they’ve really struggled with — getting the coolness factor, the hipness factor, back,” she said.
Gap released its earnings after the markets closed. During regular trading, its shares fell 90 cents, or 5.5%, to $15.52.
