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Old Navy helps Gap sail through retail gloom

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05/18/2017 | 07:17pm EDT
A Gap Inc. retail store is shown in La Jolla

(Reuters) - Gap Inc reported a surprise rise in quarterly same-store sales, bucking the trend of dismal results in the U.S. retail industry, as the company benefited from the robust performance at its Old Navy brand.

The company's shares were up 4.5 percent at $24.24 in after-market trading on Thursday.

Comparable sales at the low-cost Old Navy brand jumped 8 percent in the first quarter ended April 29, handily beating the 2.2 percent rise estimated by Consensus Metrix.

The brand reported a 6 percent drop in same-store sales a year earlier.

Old Navy, the company's biggest brand by revenue, has been a bright spot, posting its fifth consecutive year of sales growth in 2016.

"Old Navy has a very significant penetration of millennial customers that are engaged in that brand," Chief Executive Art Peck said on an earnings call with analysts.

Peck also remained bullish on the company's 'Athleisure' brand, Athleta, calling it an "exceptional performer".

Gap has been looking to replicate its success with the Old Navy at its Banana Republic and namesake brands.

Comparable sales at Banana Republic fell 4 percent, compared with an 11 percent drop a year earlier. Analysts had expected a decline 4.2 percent, according to Consensus Metrix.

"All of our brands executed well over the important Easter selling season, particularly at Old Navy, which tends to realise outsized impacts over key holiday period," Chief Financial Officer Teri List-Stoll said during the call.

The company's same-store sales rose 2 percent in the latest quarter. Analysts on average had expected a 0.2 percent fall, according to Consensus Metrix.

Gap's results come amid a gloomy retail environment with department stores such as Macy's Inc and J.C. Penney Co Inc and apparel retailers including Ralph Lauren Corp and American Eagle Outfitters Inc reporting disappointing results.

"The result was delivered in a tough market is an achievement," GlobalData Retail Managing Director Neil Saunders said.

However, Saunders raised concerns about the company's dependence on Old Navy.

"Outside of this powerhouse of growth, the company's other brands fared far less well...This imbalance means that Gap is firing on just one cylinder," he said.

Gap on Thursday backed its 2017 comparable sales forecast of flat to up slightly.

Net income rose to $143 million (110.43 million pounds), or 36 cents per share, in the quarter from $127 million, or 32 cents per share, a year earlier.

Revenue was flat at $3.44 billion. The company said the strong dollar impacted the quarter's revenue by about $11 million.

Analysts on average had expected a profit of 29 cents per share and revenue of $3.39 billion, according to Thomson Reuters I/B/E/S.

(Reporting by Arunima Banerjee in Bengaluru; Editing by Anil D'Silva and Sriraj Kalluvila)

Stocks mentioned in the article
ChangeLast1st jan.
AMERICAN EAGLE OUTFITTERS 2.52% 25.26 Delayed Quote.31.06%
J C PENNEY COMPANY INC 0.00% 2.76 Delayed Quote.-11.71%
MACY'S -0.76% 39.32 Delayed Quote.57.28%
RALPH LAUREN CORP -2.46% 135.09 Delayed Quote.33.57%
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Financials ($)
Sales 2019 16 569 M
EBIT 2019 1 395 M
Net income 2019 999 M
Finance 2019 512 M
Yield 2019 2,92%
P/E ratio 2019 12,78
P/E ratio 2020 12,07
EV / Sales 2019 0,73x
EV / Sales 2020 0,71x
Capitalization 12 604 M
Chart GAP
Duration : Period :
Gap Technical Analysis Chart | GPS | US3647601083 | 4-Traders
Technical analysis trends GAP
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus HOLD
Number of Analysts 26
Average target price 32,3 $
Spread / Average Target -2,3%
EPS Revisions
Arthur L. Peck President, Chief Executive Officer & Director
Bob J. Fisher Non-Executive Chairman
Teri L. List-Stoll EVP, Chief Financial Officer & Accounting Officer
Sally Gilligan Chief Information Officer
Mayo A. Shattuck Independent Director
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