SAN FRANCISCO (dpa-AFX) - Fashion retailer Gap Inc. (GPS) Thursday reported a decline in first-quarter profit, stung by weak margins, poor demand for its namesake and Old Navy brands as well as foreign currency losses. Quarterly earnings topped Wall Street estimates by a penny, while sales surpassed expectations.
Gap offers apparel, accessories and personal care products under its namesake, Old Navy, Banana Republic brands, among others. Though the U.S. is its largest market, Gap is expanding its presence in China, Japan and other nations.
The San Francisco-based retailer posted first-quarter net earnings of $260 million or $0.58 per share, compared with $333 million or $0.71 per share last year.
On average, 33 analysts polled by Thomson Reuters expected earnings of $0.57 per share for the quarter. Analysts' estimates typically exclude special items.
As earlier reported, Gap's sales for the quarter were up 1.2 percent to $3.77 billion from $3.73 billion in the prior year. Twenty-nine analysts had a consensus revenue estimate of $3.71 billion for the quarter.
Gap said foreign currency losses impacted sales by about $20 million for the quarter.
On a same store basis, sales for the quarter were down 1 percent, compared with a 2 percent increase last year. But the month of April was impressive for Gap, with same store sales up 9 percent. Many U.S. apparel retailers reported modest increases in same store sales in April as warmer weather saw shoppers venture out for spring clothing. The month of May is expected to be a strong one for retailers.
Meanwhile, Gap said same store sales at its namesake chain slid 5 percent for the quarter, compared with a 3 percent growth last year. Sales on this basis at the Old Navy brand grew 1 percent, compared with a 3 percent climb a year ago. Banana Republic edged down 1 percent.
'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,' said CEO Glenn Murphy.
The company's operating margin for the quarter receded to 11.7 percent from 14.2 percent last year. The company expects operating margin to be about flat for 2014.
Gap ended the quarter with 3,565 stores. In fiscal 2014, the company expects to open about 185 company-operated stores, focused on China, Old Navy in Japan, Athleta and global stores.
For fiscal 2014, Gap continues to expect earnings of $2.90 to $2.95 per share, while analysts currently expect $2.93 per share.
Gap stock closed Thursday at $40.86, up $0.30 or 0.74%, on a volume of 2.4 million shares on the NYSE. In after hours, the stock gained $0.24 or 0.59%, to trade at $41.10. In the past year, the stock has trended in the range of $36.13 - $46.56.
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