Gap Shares Rise As Profit Falls Less Than Expected

Gap shares rose modestly Friday as its fiscal first-quarter earnings fell less than analysts had expected.

Gap, which is still searching for a new chief executive, is seeing sluggish sales at its established stores, while absorbing costs for closing its Forth & Towne business.

The company earned 25 cents a share in the quarter, on revenue of $3.56 billion.

Shares of the merchant were recently up 1.69%, or 31 cents, at $18.60.

Analysts expected Gap to turn in a profit of 24 cents a share on sales of $3.47 billion, according to a survey from Thomson Financial.

Including charges related to Forth & Towne, first-quarter net income was $178 million, or 22 cents a share, compared with $242 million, or 28 cents a share on revenue of $3.44 billion a year ago.

Gap itself had been expecting earnings per share to range between 23 cents to 25 cents, excluding Forth & Towne.

Gap, which operates more than 3,000 stores worldwide, is trying to revive sales and regain its former position as the icon of American casual fashion. The San-Francisco-based company has been searching for a new chief executive since January and has made a slew of management changes.

The company has said uninspiring fashions have been behind Gap's flat or falling same-store sales in every month but three since June 2004.

Same-store sales, which track sales at stores open at least a year, fell 4% in the first quarter compared to a 9% decline a year earlier.

Interim chief executive Robert Fisher calls 2007 a transition year and has promised no quick fixes for turning around the company.


The stock trades at about 18 times analysts' average estimate for next year's earnings, compared with an average multiple of 14 for companies in the Standard & Poor's specialty retail index.