Gap Underwhelms Investors With In-Line Third-Quarter Earnings

SAN FRANCISCO, United States — Gap Inc., attempting a turnaround after a long sales slump, posted in-line earnings and didn't boost its forecast, disappointing investors looking for a faster comeback.

Earnings were 60 cents a share in the quarter, excluding some items, the San Francisco-based company said in a statement Thursday. The company said earlier this month that profit would probably be 59 to 60 cents, with analysts pegging their estimates to the higher figure.

Third-quarter net sales were $3.80 billion, also matching estimates.

The shares fell as much as 3.9 percent after the results failed to impress shareholders, who were originally promised a sales rebound in the spring. Instead, results have continued to languish at the company's Gap and Banana Republic chains, though its lower-priced Old Navy division has shown signs of recovery.

The shares fell as low as $29.50 in extended trading in New York. The stock had gained 24 percent this year through Thursday’s close as investors wagered a comeback was in the works.

Adding to the company’s woes was a fire at the company’s distribution centre in Fishkill, New York, which took a toll on all three of Gap’s major chains. The August blaze forced the retailer to reroute deliveries and boost staff at other facilities.

Old Navy

Old Navy’s same-store sales grew 3 percent last quarter, including a negative impact of 1 percentage point from the Fishkill fire. On that basis, the Gap and Banana Republic brands both tumbled 8 percent in the third quarter, which ended Oct. 31.

Earlier this week, Gap hired Teri List-Stoll as its next chief financial officer, turning to a former executive of Dick’s Sporting Goods Inc. and Kraft Foods Group Inc. List-Stoll will step into a job being vacated by Sabrina Simmons, whose departure was announced on Nov. 2.

In another sign of upheaval, Banana Republic is exiting the UK next year. The company will close all eight Banana Republic stores in the country, although customers can still order items through the chain’s regional website.

By Lindsey Rupp; editors: Nick Turner and Mark Schoifet.

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