Gap Inc. Q3 Profit Tops Estimates, Q4 Forecast Misses

Singer Tony Bennett appears in Gap's holiday campaign: Give Love With Gap This Season

Singer Tony Bennett appears in Gap’s holiday campaign: Give Love With Gap This Season

San Francisco—Gap Inc. reported Thursday afternoon that its third quarter profit rose 9.3% as sales continued to edge up. But the retail giant stuck to its fourth quarter forecast, one below analysts’ estimates.

For the quarter ended Nov. 2, Gap Inc. posted a profit of $337 million, or 72 cents a share, compared with a profit of $308 million, or 63 cents a share, a year earlier.

Net revenue rose 3.1% to $398 billion while total comparable store sales increased 1%.

Analysts’ average estimate expected Gap Inc. to hit a profit of 71 cents a share on sales of $3.97 billion.

‘Maintain Our Momentum’

By division, comp store sales rose 1% at Gap, but fell 1% at Banana Republic and were flat at Old Navy. But online sales increased 20%.

Gap previously had reported net sales climbed 3.1% to $3.98 billion, with same-store sales rising 1%. Same-store sales, a key metric for retailers, climbed 1% at Gap but fell 1% at Banana Republic and were flat at Old Navy. Online sales, meanwhile, jumped 20%.

By region, total Gap Inc. sales were up 1.5% in the United States, but rose 11% in Asia, 3.5% in Canada and 6.8% in Europe.

“This quarter marks our seventh consecutive quarter of positive comp sales growth,” said Glenn Murphy, chairman/ceo. “We are pleased to maintain our momentum of growing sales and earnings per share this quarter.”

Gross margin narrowed to 40.0% from 41.2% a year earlier, while operating margin for the quarter improved 100 basis points to 14.5%.

While Gap Inc.’s fourth quarter forecast for per share earnings between 70 cents to 71 cents was above analysts’ estimates, its full year forecast remains below forecasts. The company reaffirmed full year earnings of $2.57 to $2.65 a share. Analysts expect the earnings of $2.74 a share.

The company also said that its Board of Directors has approved a new $1 billion stock buyback authorization. The company repurchased about 20 million shares for about $790 million during the third quarter, completing all but $100 million of its existing share repurchase authorization.

 

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Jeff Prine, Editor at Large, Accessories Magazine
Jeff returns as a regular contributor to Accessories magazine. Initially Jeff worked as senior editor at Accessories more than 20 years ago and his love of the industry has followed him until present. Since his tenure here, Jeff has continued to report jewelry, watch and other luxury goods trends as executive editor at Modern Jeweler magazine, fashion director at Lustre, and as contributor on products and trends for consumer and trade publications and websites. In addition to his editorial experience, Jeff also served as an adjunct instructor for accessories merchandising at Fashion Institute of Technology. jeffp@busjour.com