Gap raises earnings forecast

Gap, the largest US clothing retailer, raised its full-year earnings forecast as sales in North America advanced.

Gap, the largest US clothing retailer, raised its full-year earnings forecast as sales in North America advanced.

Profit this year will be $2.20 to $2.25 a share, an increase from a previous forecast of $1.95 to $2 a share, the San Francisco-based company said yesterday in a statement.

Gap has been among the top performers on the Standard and Poor's 500 Index this year as improved product and marketing at its namesake, Old Navy and Banana Republic brands drive sales in North America.

The retailer, which said revenue this fiscal year has increased 6.4 per cent to $10.9 billion (€7.90 billion), is benefiting from lower cotton costs and new management, especially at value-oriented Old Navy.

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Jennifer Davis, an analyst at Lazard Capital Markets in New York, said the company's recovery is still a work in progress.

"Sales are very good and they do show that Gap is going through a turnaround," Ms Davis, who has a buy rating on the stock, said yesterday.

"I would say they're only 50 per cent better at Gap now. They still have a lot of room for improvement."

Gap rose as much as 5.8 per cent to $35.20 in extended trading yesterday.

The shares fell 1.1 per cent to $33.26 at the close in New York and are up 79 per cent this year.

The company also boosted its full-year operating margin forecast to about 12 per cent from about 11 per cent.

Net income for the quarter ended October 27 increased 60 per cent to $308 million, or 63 cents a share, from $193 million, or 38 cents, a year earlier, Gap said.

The company forecast a range of 61 cents to 63 cents on November 1.

Comparable-store sales for Gap North America rose 7 per cent in the quarter compared with a decline of 6 percent a year earlier.

Old Navy North America posted a 9 per cent gain in same- store sales in the quarter after a drop of 4 per cent a year earlier.

International comparable-store sales declined 3 per cent compared with a drop of 10 per cent a year ago.

Bloomberg