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Thursday, Aug 16, 2012 8:15 PM UTC

Gap’s 2Q profit up 28 percent

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Topics: From the Wires,

NEW YORK (AP) — Gap Inc. on Thursday reported a 28 percent increase in second-quarter net income as the fashion retailer’s moves to liven up its clothing attracted more shoppers back to its stores.

Gap, which operates stores under its namesake, Old Navy, Banana Republic and Athleta, also raised its full-year profit guidance though it’s below what Wall Street analysts forecast.

Its shares fell 55 cents to $34.06 in after-hours trading.

The company, based in San Francisco, has struggled for years to reclaim its fashion status. The latest results offer more confidence that a comeback, started in the first quarter, is taking hold. The company has stepped up its marketing and this spring and summer pushed trendy clothing like brightly colored jeans.

“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 and CEO in a statement. “Our continued focus on product and store execution is helping to drive momentum, and we’re committed to sustaining solid performance for the remainder of the year.”

Gap earned $243 million, or 49 cents per share, in the three-month period ended July 28. That compares with $189 million, or 35 cents per share, in the year-ago quarter.

Revenue rose 6 percent to $3.58 billion.

Analysts expected a profit of 46 cents per share on revenue of $3.57 billion, according to FactSet.

Revenue at stores opened at least a year was up 4 percent. By division, the metric rose 7 percent at Gap and Banana Republic and 3 percent at Old Navy. International same-store sales fell 5 percent in the quarter.

The figure on revenue at stores open at least a year — or same-store sales — is a key statistic in retailing because it excludes the effect of opening and closing stores in that period.

Gap has worked hard to bring customers back, from staff changes to new ad campaigns. In April, it named Stef Larsson, former head of global sales for H&M, as president of its Old Navy brand. He’ll start by the end of October, replacing Tom Wyatt, who resigned in February.

Gap already had brought back Tracy Gardner as creative adviser. She’s expected to make an imprint on holiday fashions, executives have said. Gardner worked at Gap and Banana Republic in the late 1990s and early 2000s.

A February 2011 management shake-up ended with a new president for the Gap brand, and more than a year ago the chain’s design director, Patrick Robinson, was ousted. Gap also established a Global Creative Center and consolidated its marketing in New York.

Meanwhile Gap has been expanding in other countries as it pares back its fleet of U.S. Gap stores by 34 percent by the end of 2013, compared with 2007, not including Gap Outlets. That will leave 700 Gap stores. The company plans to maintain its Old Navy stores in North America but will make them smaller.

Gap now expects earnings per share for the full year to be in the range of $1.95 to $2.00. That compares with $1.56 per share in the previous year. Analysts had expected $2.09 per share for this fiscal year.

More By Anne D'innocenzio.

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