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Gap Jumps as Old Navy Fuels Optimism for Faster Rebound

Banana Republic and the Gap brand also outpaced estimates.
Source: Shutterstock
By
  • Bloomberg

NEW YORK, United States — Gap Inc.'s Old Navy brand is giving investors reason to believe the apparel retailer remains relevant, even if the company's namesake stores are still looking for a boost.

Comparable-store sales increased 9 percent at the discount chain — almost triple the estimate from Consensus Metrix. This caused shares to jump during extended trading. Sales at Banana Republic and the Gap brand, while more moderate, also outpaced expectations.

The apparel retailer has been working to leverage the ongoing success of Old Navy into gains at its other chains, most notably a flagship Gap brand that has stumbled with fashion misses and deep discounts. As mall traffic dwindles, Chief Executive Officer Art Peck is looking to bolster online sales and find more ways to cut costs.

Profit excluding some items was 61 cents a share in the quarter ended Jan. 28, the company said on Thursday. That’s higher than analysts’ average projection of 59 cents. For the coming fiscal year, earnings will be $2.55 to $2.70 a share, outpacing analysts’ average estimate of $2.41.

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The company forecast comparable sales will be flat or up slightly for the full fiscal year.

The shares rose as much as 12 percent to $35.60 in extended trading in New York. The stock surged 52 percent in 2017, mostly on the success of Old Navy.

Same-store sales at Old Navy had been estimated at 3.4 percent by Consensus Metrix. Banana Republic sales climbed 1 percent by the same measure, versus an estimate for a 2.3 percent decline. Gap sales were flat, while analysts had forecast a decline of 0.5 percent.

By Lindsey Rupp; editors: Nick Turner and Jonathan Roeder.

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