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Gap raises forecast as second-quarter profit beats estimates

Published 08/21/2014, 04:21 PM
Updated 08/21/2014, 04:40 PM
© Reuters Passers-by walk next to a Gap store in Broomfield, Colorado

© Reuters Passers-by walk next to a Gap store in Broomfield, Colorado

(Reuters) - Teen apparel retailer Gap Inc reported a better-than-expected quarterly profit and sales and raised its full-year profit forecast, helped by strong sales of its low-priced Old Navy clothes.

Comparable sales at Old Navy stores, which cater to a slightly older customer base, rose 4 percent in the second quarter ended Aug 2.

But sales in its Gap and Banana Republic brands, which mainly cater to teens, were disappointing. Comparable store sales fell 5 percent at Gap and were flat at Banana Republic.

Many large U.S. retailers have reported disappointing quarterly sales at their established stores, pointing to a cutback in spending on discretionary items.

Gap rival Aeropostale Inc on Thursday reported a 13 percent fall in second-quarter comparable sales. American Apparel Inc said on Monday quarterly same-store sales declined 6 percent.

Gap said on Thursday it was planning to introduce its Gap brand in India through 40 franchise-operated stores.

The company raised its full-year profit forecast to $2.95-$3.00 per share for the year ending February 2015. It had previously forecast $2.90-$2.95 per share.

Analysts on average expected the company to earn $2.95 per share for the year, according to Thomson Reuters I/B/E/S.

Net profit rose to $332 million, or 75 cents per share, in the second quarter ended Aug. 2, from $303 million, or 64 cents per share a year ago.

Excluding items, the company earned 70 cents per share.

Revenue rose 3 percent to $3.98 billion. Comparable sales were flat versus a 5 percent increase a year earlier.

Analysts on average expected a profit of 69 cents per share on revenue of $3.96 billion.

© Reuters. Passers-by walk next to a Gap store in Broomfield, Colorado

Gap's shares were up 1 percent at $43.18 in extended trading.

(Reporting by Ramkumar Iyer in Bangalore; Editing by Saumyadeb Chakrabarty)

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