Gap profit beats Street as PacSun outlook disappoints
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Thu, 21 Aug 2008 22:27:22 GMT |
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LOS ANGELES (Reuters) - Gap Inc reported quarterly profit on Thursday that jumped 50 percent to beat Wall Street estimates, as cost-cutting and other moves offset declining sales at its family of chain stores.Overall same-store sales, a measure of retail health, fell 10 percent at Gap and were also down at Wet Seal Inc , Bebe Stores Inc and Pacific Sunwear of California Inc , as summer shoppers, stunned by higher grocery and gas prices, reeled in spending.The shares of the company, which owns the Gap, Old Navy and Banana Republic brands chains, rose 3 percent after margin improvement fueled the results.Gap said second-quarter net profit was $229 million, or 32 cents per share, compared with $152 million, or 19 cents per share, a year ago. Analysts had forecast a profit of 31 cents per share, according to Reuters Estimates.Total sales fell 5 percent to $3.5 billion from $3.69 billion in the quarter, roughly in line with the nearly $3.51 billion expected by Wall Street.Gap, one of the largest apparel retailers in the world with over 3,000 stores, has been trimming costs, reducing inventory and streamlining operations to shore up its business. It has suffered through years of sliding sales due to strong competition and its own fashion miscalculations.Gross profit margins increased 390 basis points during the quarter. Gap said it now expects its fiscal 2008 operating profit margin will be roughly 10 percent of sales, up from its earlier view of 8.5 percent to 9.5 percent.Inventory levels per square foot fell 17 percent in the quarter, the company said.AEROPOSTALE BUCKS TRENDElsewhere, Pacific Sunwear reported that net income from continuing operations fell 60 percent, in line with the expectations of analysts. But the shares of the beach-inspired retailer dropped more than 20 percent after its earnings forecast for the balance of the year fell far short of estimates.Pacific Sunwear forecast third-quarter earnings of nil to 5 cents per share, below analysts' call for earnings 23 cents per share.Aeropostale Inc , a top performing teen retailer, bucked the trend.Its second-quarter net profit rose almost 44 percent to match Wall Street's estimate after its back-to-school merchandise was "positively received" and same-store sales increased 11 percent.The company, popular for its relatively low prices, also said it was well positioned for the second half of 2008.Gap shares rose to $19.60 from their close of $19.01 on the New York Stock Exchange.Aeropostale shares fell to $33 after finishing at $34 on the New York Stock Exchange, while Pacific Sunwear shares fell to $5.99 from their Nasdaq close of $7.78.(Reporting by Lisa Baertlein and Alexandria Sage; Editing by Phil Berlowitz and Andre Grenon)
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