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May 30 (Reuters) - Gap Inc cut its full-year earnings forecast and reported bigger-than-expected declines in same-store sales, especially at its Gap brand outlets, on Thursday, sending its shares down nearly 10% after hours.
Once a trendsetter with its casual logo emblazoned hoodies and khaki cargos, the Gap brand has come under pressure as a lack of new designs pushed its customers to switch to fast-fashion rivals such as H&M and Inditex's Zara.
Sales at established Gap brand stores fell 10% in the first quarter ended May 4, its biggest fall in at least three years and steeper than the 4% decline analysts had estimated.
"This quarter was extremely challenging," Chief Executive Officer Art Peck said in a statement.
Peck replaced Gap brand's head last year and hired a new marketing chief, in efforts to turn around the unit with more appealing products, shorter response times in bringing designs from sketchpad to stores and better advertising.
But those efforts are yet to succeed. Quarterly same-store sales at the brand have risen only once since the start of 2016, according to Refinitiv data.
"Gap could have had an opportunity to be fun, but you walk into a store and the product looks boring and there's no real experience... there are so many components that should have been fixed and they just haven't been - it's outdated itself," Jane Hali & Associates analyst Jessica Ramirez told Reuters.
Adding to the worries, Old Navy, a bright spot for the company in recent years and which is being separated as a publicly listed company, reported a surprise drop in same-store sales. Comparable store sales slipped 1% in the reported quarter, compared with estimates of a 0.8% rise, according to IBES data from Refinitiv.
"We remain confident in our plan to separate into two independently traded public companies in 2020," Peck said.
Overall same-store sales fell 4%, bigger than the 1.2% drop analysts had expected.
The San Francisco-based company cut its 2019 adjusted earnings forecast to $2.05 to $2.15 per share, from a previous range of $2.40 to $2.55.
Excluding certain items, Gap earned 24 cents per share, while analysts on average had expected 32 cents.
(Reporting by Uday Sampath in Bengaluru; Editing by Sriraj Kalluvila)