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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.

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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.