Gap cuts 2019 profit forecast after 'extremely challenging' quarter

Gap Inc cut its full-year earnings forecast and reported a bigger-than-expected drop in same-store sales, especially at its Gap brand outlets, on Thursday, sending its shares down over 11% after hours.

Gap, once a trendsetter with its casual logo emblazoned hoodies and khaki cargos, has been under pressure as a lack of new designs pushed its customers to switch to fast-fashion rivals such as H&M and Inditex's Zara.

Sales at established Gap brand stores fell 10% in the first quarter ended May 4, bigger than the 4% decline analysts' had estimated, according to IBES data from Refinitiv.

"This quarter was extremely challenging," Chief Executive Officer Art Peck said in a statement.

Old Navy, which has been a bright spot for the company in recent years, reported a surprise drop in same-store sales, down 1% compared with estimates of a 0.8% rise.

In February, Gap said Old Navy would be separated as a publicly listed company.

"We remain confident in our plan to separate into two independently traded public companies in 2020," Peck said.

Overall same-store sales fell 4%, larger than the 1.2% drop analysts had expected.

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The San Francisco-based company cut its 2019 adjusted earnings forecast to $2.05 to $2.15 per share, from a previous range of $2.40 to $2.55.

Excluding certain items, Gap earned 24 cents per share, while analysts on average had expected 32 cents.

(Reporting by Uday Sampath in Bengaluru; Editing by Sriraj Kalluvila)