Old Navy revival lifts Gap in 2Q

By Associated Press
Posted Aug. 19, 2010 at 3:17 p.m.

Rising sales at its low-price Old Navy chain helped Gap Inc. post a 3 percent increase in second-quarter net income, Gap said Thursday.

Based in San Francisco, Gap also operates Banana Republic and Gap stores, plus its websites including its Piperlime online business. And it affirmed a profit outlook for the year that is in line with Wall Street estimates.
Gap also said Thursday that its board has authorized a new $750 million share repurchase program, bringing the total share repurchases authorization in fiscal 2010 to $1.75 billion.

For the quarter that ended July 31, Gap’s net income was $234 million, or 36 cents per share, up from $228 million, or 33 cents per share, a year earlier.

Revenue was $3.32 billion, up from $3.24 billion.

Analysts surveyed by Thomson Reuters expected 35 cents per share on revenue of $3.31 billion for the quarter.

Glenn Murphy, Gap Inc.’s chairman and chief executive, said in a statement that the company is committed to expanding revenue and market share in North America as it invests in its long-term growth online and around the world.

Old Navy, which had lost market share for five years ending in 2008, has been remodeling its stores to make them easier to shop. In 2009, it launched new marketing to refocus on its core market of frugal moms.

The division, which accounted for 37 percent of Gap’s revenue in the quarter, brought in $1.25 billion, up from $1.24 billion a year earlier.

By year’s end, the company expects to have stores in China, Italy and Australia, reaching customers in a total of about 80 countries.

Gap announced last week that it began shipping online orders to 55 countries, allowing it to test the market for its brands overseas. By the end of fiscal 2010, Gap will offer online shopping 10 more countries. Its second-quarter online revenue rose 15 percent, to $258 million from $224 million a year earlier.

Gap’s quarterly revenue at stores open at least a year rose 1 percent from a year earlier. But in 2009’s second quarter it was 8 percent below the second quarter of 2008. The figure is based is a key indicator of a retailer’s health because it excludes the effects of expansion and stores closing.

The figure rose 3 percent for Banana Republic stores in North America, but that’s being compared with an 15 percent drop in the previous year. Gap’s North America business suffered a 4 percent decline in revenue at stores opened at least a year from a year ago when that measure dropped 10 percent from the previous year. The company’s international business was up 3 percent.

Gap reiterated its guidance for fiscal 2010, forecasting that earnings per share should be in the range of $1.77 to $1.82. Analysts surveyed by Thomson Reuters expect $1.79 per share.

Its stock closed down 30 cents, to $17.70, Thursday on the New York Stock Exchange.

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