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Home / Business / Gap shares fall for profits as the growth of the Old Navy subsides

Gap shares fall for profits as the growth of the Old Navy subsides



Gap Inc. reported sales that outperformed its first-quarter analyst estimates on Thursday, but earnings fell short of expectations thanks to a further slump in the Gap brand and a more unexpected slowdown in the Old Navy.

"Despite the pressures we faced in the first quarter, we reaffirm our full year guidance and reflect our confidence in the underlying fundamentals of the business and the benefits of implementing our balanced growth strategy," said Gap CFO Teri List Stoll said in a statement.

Net income for the period ended May 5, 2006 was $ 1

64 million, or 42 cents per share, compared to $ 143 million, or 36 cents a share a year ago. Excluding one-time items, the retailer scored 42 cents a share, 4 cents less than analysts expected, according to a Thomson Reuters survey.

Total revenue climbed from $ 3.4 billion a year ago to $ 3.8 billion, outperforming analysts' $ 3.6 billion forecast.

Overall, same-store sales – an important measure used by analysts to monitor retailers – increased 1 percent, while Street expects 1.7 percent, according to a Thomson Reuters survey.

CEO Art Peck said the gap brand had its "expected challenges" in the last quarter. After a telephone conversation with analysts and investors on Thursday afternoon, he said that Athleta continues to be an "underestimated gem" in Gap Inc.'s portfolio.

Earlier this year, the company announced plans to open 60 Old Navy stores by the end of 2018 as part of a multi-year expansion of the Old Navy and Athleta brands. Meanwhile, it includes an indeterminate number of Gap and Banana Republic stores. On Thursday it was said that the openings and closures would be extended to around 25 locations by the end of the financial year.

Peck has told CNBC that he is focused on moving to more open-air centers and retail outlets and off-street shopping malls.

Earlier this month, the Telsey Advisory Group topped Gap to outperform market performance, citing "sequential improvements in operational momentum that … matches the underlying health of the brand portfolio."

Gap Inc. expects to earn $ 2.55 to $ 2.70 per share in 2018.

Following the close on Thursday, Gap's shares climbed nearly 50 percent to over $ 33 per share a year ago. The retailer today has a market capitalization of about $ 12.8 billion.


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