Gap Inc. Q2 Profit Up 10%, Plans for India

In Industry News, Reports, What's New by Jeff PrineLeave a Comment

Banana Republic stores recently introduced a new look in merchandise

Banana Republic stores recently introduced a new look in merchandise

San Francisco—Despite narrowed margins like some other specialty retailers, Gap Inc. reported late Thursday a 10% rise in profit, helped by higher sales and a gain from asset sale.

For the three months ended August 2, Gap Inc. posted a profit of $332 million, or 75 cents a share, up from $303 million, or 64 cents a share, a year earlier. The latest quarter’s results included a per-share benefit of about 5 cents tied to the building sale. Excluding that benefit, per-share earnings were 70 cents. On average, analysts expected the company to earn 69 cents a share.

Entering India

Net sales rose 3% to $3.98 billion from $3.87 billion in the same quarter last year. Comparable store sales were flat. Analysts’ consensus revenue estimate was for $3.96 billion.

Earlier this month, Gap Inc. had forecast adjusted earnings of 68 cents to 69 cents a share and reported sales growth of 3% to $3.98 billion.

By brand, the company had reported sales at its namesake brand fell 5%, while sales at Banana Republic were flat and sales at Old Navy rose 4%.

Operating margin improved to 14.2% from 13.5% last year.

“Building on last year’s strong performance, we are pleased to have grown our sales three percent and delivered solid improvement in earnings per share,” said Glenn Murphy, chairman/chief executive officer. “We remain focused on our strategic initiatives, as we turn our focus toward delivering a strong second half.”

Gap Inc. raised its full year earnings guidance to a range of $2.95 to $3.00 a share from its prior guidance of $2.90 to $2.95 a share, to reflect the 5 cents per share related to the gain on asset sale. Analysts currently expect the company to earn $2.95 a share for the full year.

In other news, Gap Inc. unveiled plans to enter India through franchise-operated Gap-brand stores next year. The company added it plans to increase its store base in the greater China region as well.

The company is partnering with Arvind Lifestyle Brand Ltd., a subsidiary of Arvind Ltd. The first stores are expected to open in India’s two largest cities, Mumbai and Delhi, starting with Gap’s Summer 2015 collection. Gap Inc. plans to open about 40 franchise-operated Gap stores in India.