Gap Inc.'s (GPS) fiscal second-quarter profit fell 0.4% as the
casual-clothing retailer posted lower sales across all four of its
divisions, but margins and online sales improved.
The retailer, which suffered from fashion misfires before the
recession, has been focusing on a leaner inventory and
traffic-driving promotions. The company also launched its premium
denim line earlier this month, as it hopes to take market share
away from pricer lines such as True Religion and 7 for All
Mankind.
For the quarter ended Aug. 1, Gap reported earnings of $228
million, or 33 cents a share, down from $229 million, or 32 cents a
share, a year earlier. The latest quarter had fewer shares
outstanding. Earlier this month, the company projected per-share
earnings of 30 cents to 32 cents, above analysts' estimates at the
time.
Earlier this month, Gap reported net sales declined 7.4% to
$3.24 billion as same-store sales dropped 8%. Same-store sales
continued to fall across all four divisions, with the largest
decline of 15% at higher-end Banana Republic, and Gap and Old Navy
same-store sales down 10% and 4%, respectively. International sales
dropped 5%. Gap last reported a monthly increase in same-store
sales for January 2008.
Still, the results at Old Navy were an improvement from a year
ago, when same-store sales slumped 16%. Gap has been focusing on
providing better merchandise at Old Navy.
Gross margin grew to 39.7% from 38.2%.
Online sales improved 17% to $224 million. Inventory slid
14%.
The company, which is the largest independent clothing retailer
by revenue, opened 12 stores and closed 16 during the quarter,
ending with 3,145 locations. It still expects to open 50 stores and
close 100 stores, with capital spending of $350 million for the
fiscal year.
Gap is also testing an accessories-only branch of Banana
Republic called Edition, which it launched in May. Jewelry and bags
can yield a higher profit margin and the goods take up less space
and have a more timeless appeal.
Shares rose 1.5% to $19.14 in after-hours trading. The stock has
been rebounding recently, and is up by over a third this year.
-By John Kell, Dow Jones Newswires; 212-416-2480;
john.kell@dowjones.com