Gap profits jump 29%
Gap, the largest US specialty-apparel retailer, reported a 29 per cent rise in quarterly profit that topped analyst estimates, aided by domestic sales, and raised its full-year earnings forecast.
Net income for the quarter ended in July rose to $243 million, or 49 cents a share, from $189 million, or 35 cents, a year earlier, the San Francisco-based company said yesterday in a statement.
The company had forecast a range of 47 cents to 48 cents on August 2.
Gap's stock increase has made it the fifth-best performer in the Standard and Poor's 500 Index this year, as new merchandise and marketing at its namesake brand in North America drove the best first half of same-store sales since 2003.
Second-quarter sales rose 5.6 per cent to $3.58 billion, the best in five years, driven by Gap and Banana Republic brands in North America, the company said earlier this month.
Gap is managing its inventory better and using fewer discounts and promotions, which bodes well for the second half of the year, Jennifer Davis, an analyst at Lazard Capital Markets in New York, wrote in an e-mail.
"The full-year guidance is conservative," she wrote.
Fiscal full-year profit may be $1.95 to $2 a share, the company said, up from Gap's previous forecast in May of $1.78 to $1.83.
The average estimate of 26 analysts is for full-year profit of $2.08 a share.
The shares rose as much as 2 per cent to $35.03 in extended trading yesterday, after closing down 0.8 per cent to $34.34 in New York. The stock has risen 85 per cent this year.
Analysts have been viewing Gap's sales success as the start of a turnaround, with new talent at the company's Gap, Old Navy and Banana Republic brands working to regain sales from rivals like J. Crew Group and Hennes and Mauritz.