Gap earnings in line with Street, but guidance light

Gap full year guidance sharply below estimates
Gap full year guidance sharply below estimates

Gap on Thursday posted quarterly results that largely met expectations, but forecast that it could face a challenging year ahead.

The retailer reported fiscal fourth-quarter earnings of 57 cents per share, adjusted, on $4.39 billion in revenue.

Analysts expected Gap to post earnings per share of 57 cents on revenue of $4.46 billion, according to Thomson Reuters consensus estimates.

"With a year of transition behind us, I'm confident that we have the right strategies in place to fuel our long-term growth," said Art Peck, Gap's chief executive officer, in a statement.

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For fiscal 2016, Gap expects earnings in a range of $2.20 to $2.25 per share, which would mark a decrease from $2.43 per share in 2015. The number came in well below average analyst estimates of $2.43 per share, according to StreetAccount.

The company's shares fell nearly 5 percent in after-hours trading before gaining back some of those losses.

Gap also announced its board approved a new $1 billion share buyback authorization.

Its companywide comparable-store sales slid 7 percent in the fourth quarter from a year earlier, in line with its previously announced expectations. Comparable-store sales at Old Navy — its fastest-growing segment — stalled out to finish the quarter flat.

The retailer sees an operating margin of 9.5 percent in 2016, versus average analyst expectations of about 10.2 percent.

Gap previously said same-store sales were down 8 percent in January. The company, once a bellwether of the denim craze, has undergone restructuring since Peck took the reins early last year.

Peck touted its efforts to boost digital and mobile shopping. The company said it had online sales of $803 million in the fourth quarter.

— CNBC's Abigail Stevenson contributed to this report.