Gap’s Old Navy Sales Win The Quarter; Investors Remain Hopeful
Gap Inc., the largest apparel retailer in the U.S., posted second-quarter earnings that beat estimates as shoppers went for bargains at its Old Navy chain, and athletic wear continued to grow.
The stock rose 5.01% by midday trading.
Investors said apart from Old Navy and growth in athletic wear, Gap has also been helped by its ability to save. Excluding a gain from an asset sale, profit pushed up to 70 cents a share, versus analyst’s 69 cent estimates. Keeping costs low has been essential to many brands suffering from margin expansion.
Net income rose 9.6 percent to $332 million, or 75 cents a share, from $303 million, or 64 cents a year earlier, the San Francisco-based company said in a statement yesterday.
Old Navy’s lower priced offerings continued to lead sales gains from the first quarter. Same store sales grew 4%, as compared with a 5% decline for Gap. Company-wide sales remained flat, compared with a 5% gain last year.
CEO Glenn Murphy, facing stalling growth in Gap stores in the U.S., has pushed for markets which have many untapped customers. Today it announced that it will open stores in India, beginning with Delhi and Mumbai. Gap will then expand to other cities for a total of 40 stores in the country.
Investors think that Gap is on the right track, including its investments in technology for online reservations and shopping. Online net sales rose 11% to $515 million last quarter, Gap said in a statement. The company has also expanded athletic apparel, a growing category as workout clothes become mainstream fashion. Its Athleta chain for women will expand to 100 stores from the current 79, and is shaping up as a competitor to Lululemon, which leads this category.
Follow @anirvanghosh on StockTwits.
