Shares of Gap Inc. dipped Thursday after the clothing retailer reported second-quarter profits and revenue that were better than expected and offered an upbeat full-year forecast despite a difficult backdrop for the apparel industry.
The company, which along with its namesake stores also owns Old Navy and Banana Republic, said it still expects sales for its full year to be "up slightly," in keeping with its prior outlook.
But it bumped its gross-margin outlook higher to a 200-basis-point expansion, compared with earlier expectations for an expansion of "at least" 150 basis points, and also said it expects higher operating-income growth.
Gap released the results - earlier in the day than anticipated - as other retailers warn of a more cautious consumer still beset by a two-year rise in prices for essentials like groceries. Since last year, the company has shaken up its executive team and brought aboard designer Zac Posen in an effort to maintain relevance, as fast fashion and social media force traditional apparel companies to be more nimble in how they adapt to trends.
"In comparison to where we were only one year ago, we are in a stronger position across key metrics that matter - including net sales, margins, and our cash position - and we are making consistent progress in the reinvigoration of our brands," Chief Executive Richard Dickson said in a statement on Thursday.
The stock is up 10.9% so far this year.
Gap was set to report results after the market close. Trading in the stock was temporarily halted after the results were published earlier in the day. Gap did not immediately respond to a request for comment on the timing.
Gap reported second-quarter net income of $206 million, or 54 cents a share, compared with $117 million, or 32 cents a share, in the same quarter last year. The profit figure released on Thursday was above FactSet estimates for 41 cents a share.
Revenue rose 5% year over year to $3.7 billion, above estimates for $3.63 billion, while same-store sales were up 3%, a bit below estimates for a 3.2% gain.
Gap saw continued same-store sales gains at namesake stores and Old Navy locations, the latter of which the company has tried to make more attractive to families. Executives said "reinvigoration efforts" at Gap stores have helped the chain pick up a bigger share of the market.
Same-store sales at Banana Republic, meanwhile, were flat compared to the prior-year quarter. Gap said it was Banana Republic was still trying to turn itself around, and fix its pricing and product assortment. Management has said they want to make Banana Republic into a destination for wealthier shoppers.
Comments