Gap profit off 1.3%, sales up 1.7% in 3Q

By Dow Jones Newswires
Posted Nov. 18, 2010 at 3:31 p.m.

Gap Inc.’s  fiscal third-quarter profit fell 1.3 percent, though share repurchases boosted the the casual-apparel retailer’s per-share earnings.

But shares of Gap, which affirmed its fiscal-year outlook, were down 2.1 percent, at $20.47, after hours as margins fell and the company said it would close fewer stores than previously planned.

Earlier this month, the company reported net sales grew roughly 1.7 percent, to $3.65 billion, better than analysts’ expectations, as comparable-store sales were flat.

Of all Gap’s operations, only lower-priced Old Navy saw same-store sales decline, though it had the toughest comparison of all the divisions. It reported a 2 percent drop versus a 10 percent increase last year. Namesake North American stores and upscale Banana Republic both reported a 1 percent climb, while international same-store sales were up 3 percent.

The company has been expanding abroad, opening stores in China, growing in Europe and launching international shipping to dozens of countries for online orders. Thursday, Gap said that online sales rose 15 percent in the period.

For the quarter ended Oct. 30, the company posted a profit of $303 million, down from $307 million year earlier. On a per-share basis, the bottom line rose to 48 cents from 44 cents because the latest quarter had 11 percent fewer shares outstanding. Earlier this month, the company projected 47 cents to 48 cents, above analysts’ then-estimate.

Gross margin fell to 41.2 percent from 42.5 percent. Inventory per square foot rose about 9 percent as of the end of the quarter.

For the year, Gap is now predicting it will shutter 100 stores, weighted toward the Gap brand, compared with its previous view for 110. It still expects to open 65 stores.

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