Gap Profit Rises; Retailer Stands by 2008 Forecast

Gap posted higher quarterly net profit on Thursday, topping Wall Street expectations, helped by lower inventory and cost cutting that boosted margins, even as sales fell at its various U.S. retail chains.

The global apparel retailer, which operates the Gap, Old Navy and Banana Republic chains as well as online shoe seller Piperlime, also stood by its full-year earnings guidance.

Net income in its third quarter ended Nov. 1 rose to $246 million, or 35 cents per share, from $238 million, or 30 cents per share, a year earlier.

Sales fell nearly 8 percent to $3.56 billion from $3.85 billion, the San Francisco -based company said.

Analysts, on average, expected earnings of 34 cents on sales of $3.55 billion, according to Reuters Estimates. The company predicted earnings between 33 cents to 35 cents per share.

Gap has been trying to dig itself out of a multiyear sales slump by improving its products and finessing its image and target customer.

But like most U.S. retailers, Gap has been hurt as shoppers cut back on all but the most vital purchases such as food and gasoline.

Looking ahead, Gap said it still backs its fiscal 2008 earnings view in a range between $1.30 to $1.35 per share.

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Shares of the company , which have fallen 55 percent since January, closed at $9.51, down nearly 6 percent, on the New York Stock Exchange.

The stock is valued at 7.5 times fiscal 2009 earnings, in line with the Dow Jones U.S. Apparel Retail Index , but at a premium to specialty retailer Limited Brands and department store Macy's .

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