San Francisco—Gap Inc. appears to be rebounding from its 16% sales drop in 2011: the apparel specialty retailer reported Thursday that its second quarter profit jumped 29%.
For the quarter ended July 28, the parent of Gap, Old Navy and Banana Republic posted net income of $243 million, or 49 cents a share, compared to $189 million, or 35 cents a share, for the year-ago quarter.
Total net sales rose 6% to $3.58 billion. Comparable store sales rose 4%, and in July, sales by the same measure jumped 10%.
The improvement was better than analysts’ average estimate for earnings of 48 cents a share on sales of $3.53 billion.
“Customers responded well to our product offerings across our brands, driving a healthy increase in sales and earnings per share during the quarter,” said Glenn Murphy, chairman/ceo. “Our continued focus on product and store execution are helping to drive positive momentum and we’re committed to sustaining solid performance for the remainder of the year.”
‘We Want to Win’
In a conference call with analysts, Murphy said there are a number of reasons why the company’s business has been consistently positive.
“The number one reason is product, and there’s been a lot of focus, a lot of effort starting late last year with our product teams and I’m really proud of the work they’ve done in the first half,” Murphy said. “Whether that’s on the right styles, which obviously we’ve had great success with so far.”
Murphy said the company capitalized on the surge in popularity of color, improved fit and consistency.
“Lastly, we’ve made these targeted investments in key categories, categories where we want to dominate, where we want to win, and those are our product assets,” he said. “We put the money behind those assets, and our customers are noticing it. Secondly, I think we are flowing our product in a much more seasonally correct way.”
“The increased focus on product and marketing continues to resonate with consumers and will continue to drive solid results,” said Jefferies Group analyst Randal Konik, who anticipates fall and holiday merchandise to improve further from a successful spring.
As a result of the solid improvement, Gap Inc. raised its full year earnings forecast to $1.95 to $2.00 a share, compared to its previous forecast of $1.78 to $1.83 a share. Analysts’ average forecast expects Gap Inc. to earn $2.08 a share for fiscal year 2012
During the second quarter, the company opened 29 and closed 20 company-operated store locations. The company opened its first Old Navy store outside of North America in Tokyo and continued to expand its Gap brand stores in China.
The company continues to expect net openings of about 15 company-operated stores and about 50 to 75 franchise stores during fiscal year 2012.