Gap Hits Earnings Target, Raises Outlook
Gap eported quarterly earnings Thursday that matched analyst predictions and revenue that exceeded them, prompting the company to increase its full-year outlook.
The company said it now expects full-year earnings per share in the range of $2.20 to $2.25, up from the $1.95 to $2 it forecast in August.
The apparel retailer also increased its operating margin guidance for the year from about 11 percent to about 12 percent.
Gap shares limbed more than 4 percent after the closing bell, following the news. (Click here to get real-time quotes for Gap.)
Earnings excluding items rose to 63 cents per share from 38 cents a share in the year-earlier period.
Revenue improved nearly 8 percent to $3.86 billion from $3.59 billion a year ago.
Net income came in at $308 million, up from $193 million last year.
Wall Street had expected Gap, which owns the Gap, Old Navy and Banana Republic chains, to report earnings excluding items of 63 cents a share on $3.82 billion in revenue, according to Thomson Reuters consensus estimates.
At lease one expert questioned the retailer's estimates. "When you're giving guidance, what's the point of being wrong on the upside? I think they are giving conservative guidance," said retail consultant Jan Kniffen.
"The stock's traded up because people were concerned about a slowdown in sales last month and thought it might be affecting their quarterly numbers," he said.
Last month, Gap also announced a management overhaul aimed at enabling it to respond more quickly to changing tastes around the world. The change, to take effect in February, will put the North American, international, online, outlet and franchise divisions under a single global executive for each of the company's brands.
For almost a decade, Gap had struggled with its fashion mix, losing out to rivals such as Zara parent Inditex SA and homegrown competitors such as Forever21, but its main brands have staged a big turnaround in the last year.
Banana Republic's tie-in with television show "Mad Men" was a big success, and moves such as redoing its classic Khakis in bright colors at its namesake brand proved to be a crowd-pleaser.
The company said all three brands posted positive comparable sales in North America, with Old Navy rising 9 percent.