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NEW YORK, United States — Gap Inc., the biggest apparel-focused retailer in the U.S., reported first-quarter profit that exceeded analysts' estimates, helped by sales of low-priced clothing and athletic gear.
Net income fell 22 percent to $260 million, or 58 cents a share, from $333 million, or 71 cents, a year earlier, the San Francisco-based company said in a statement today. Analysts had estimated 57 cents on average, according to data compiled by Bloomberg. Net sales for the quarter rose 1 percent to $3.77 billion in the period, which ended May 3.
While the first quarter got off to a slow start, business rebounded near the end of the period, especially at the lower- cost Old Navy chain, Chief Executive Officer Glenn Murphy said in the statement. The company's total same-store sales rose 9 percent in April, with an 18 percent jump at Old Navy. Still, the full quarter's comparable-store sales declined 1 percent.
Old Navy is appealing to value-conscious shoppers, especially when it comes to “ath-leisure” apparel, said Howard Tubin, a New York-based analyst at RBC Capital Markets. That category combines athletic and leisure wear.
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“We do give management high marks for their take on ath- leisure,” he said in a note to clients before the results. “The price points in this brand are affordable, in keeping with the preferences of the typical Old Navy shopper.”
Gap rose 0.7 percent to $40.86 at the close in New York. The shares have gained 4.6 percent this year, compared with a 2.4 percent increase in the Standard & Poor’s 500 Index.
Gap Chain
The company's flagship Gap chain posted a same-store sales decline of 5 percent in the first quarter, compared with a 3 percent increase the same period a year earlier. Sales at the Old Navy brand rose 1 percent in the first quarter, versus a 3 percent gain last year. And Banana Republic declined 1 percent, compared with a flat performance the previous year.
Gap is investing $300 million in technology over the next three years to improve online and in-store services, aiming to provide features such as self-checkout and online reservations for in-store pickup. The company also reiterated its earnings forecast for the year of $2.90 to $2.95 a share.
“We are confident in our strategies to drive long-term value, as evidenced by the reaffirmation of our full-year guidance,” Murphy said today.
By Lindsey Rupp; Editor: Nick Turner, Kevin Orland
