Gap 2Q Profit, Sales Top Street as U.S. Comp-Store Sales Grow

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Published August 16, 2012

| FOXBusiness

Gap (GPS) reported better-than-expected second-quarter earnings and sales late Thursday as demand continued to improve at its more established stores in North America, leading the retailer to lift its fiscal 2012 forecast.

The San Francisco-based retailer reported net income of $243 million, or 49 cents a share, compared with a year-earlier $189 million, or 35 cents, topping average analyst estimates in a Thomson Reuters poll by a penny.

Revenue for the three months ended July 28 was up 6% to $3.58 billion from $3.39 billion a year ago, edging narrowly ahead of the Street’s view of $3.53 billion.

Comparable-store sales, a key growth metric for retailers that measures sales at stores open longer than a year, climbed by 4%, while comp sales outside of the U.S. and Canada fell by 4%. In North America, both Gap and Banana Republic recorded comparable sales of 7%, while Old Navy’s sales grew by 3%.

Net sales abroad grew by 7%, as Gap continued to widen its presence in Asia. During the quarter, the retailer opened its first Old Navy store outside of the U.S. in Tokyo and continued its expansion of the Gap brand in China.

Franchise net sales jumped 25% year-over-year as Gap opened its 250th franchise store, and the retailer opened 11 Athleta stores, doubling its fleet across North America to 22.

Reflecting the quarter’s performance, Gap raised its full-year earnings forecast to a range of $1.95 to $2 a share, compared with $1.56 a year ago, which is still slightly below the consensus of $2.08.

“Customers responded well to our product offerings across our brands, driving a healthy increase in sales and earnings per share during the quarter," Gap CEO Glenn Murphy said in a statement.

Gap attributed the quarterly improvement to a focus on product and store execution, which Murphy said helped “drive positive momentum.”

Shares of Gap after hours ticked slightly lower to $34.09. The stock has performed well this year, rising some 85% since January.

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