Gap's Fiscal 3Q Profit Falls 1.3% on Declining Old Navy Sales
Gap's (GPS) fiscal third-quarter profit fell 1.3% as negative same-store sales for the clothing retailer's Old Navy chain offset gains overseas. Shares fell in extended trading after the company failed to beat Wall Street earnings forecasts.
Net income for the quarter ended Oct. 30 was $303 million, or 48 cents a share, down from $307 million, or 44 cents, a year earlier, the Gap said in a statement Thursday. Revenue increased 1.8% to $3.65 billion.
Gap failed to capitalize on a recent uptick in U.S. consumer spending, which increased in the third quarter at its fastest pace in almost four years. While Gap's overseas same-store sales rose 3% from a year earlier, Old Navy comparable-store sales fell 2%.
The company had been expected to earn 48 cents a share on $3.62 billion in sales, the average analyst estimates in a Thomson Reuters poll. Earlier this month, the company said fiscal third-quarter earnings per share would be 47 cents to 48 cents a share.
Gap CEO Glenn Murphy said last month that same-store sales for the quarter would likely fall on stagnating North American sales, TheStreet reported. Gap, whose same-store sales goal was between flat and a 5% increase, had been showing comparable-store sales that "are not in that bend," TheStreet reported, citing Murphy. Gap's September same-store sales fell 2% from a year earlier, while October same-store sales were up 2%.
Earlier in October, the company said it was reinstating its old logo just one week after unveiling a new logo that was widely panned. Gap, which had used the old logo for two decades, compounded the problem by soliciting suggestions from the public for new logo ideas without saying whether the company would pay for the design work.
Gap shares fell 2.7% to $20.35 at 4:10 Eastern time Thursday.