Gap Profit Tops Estimate; Plans India Entry

(RTTNews) - Fashion retailer Gap Inc. (GPS) said Thursday after the markets closed that its second quarter profit rose 10% from last year, helped by higher sales and a gain from asset sale.

The company's quarterly earnings per share, excluding items, also came in above analysts' expectations as did its quarter sales. At the same time, the company raised its full year earnings outlook.

"Building on last year's strong performance, we are pleased to have grown our sales three percent and delivered solid improvement in earnings per share," said Glenn Murphy, chairman and chief executive officer of Gap Inc. "We remain focused on our strategic initiatives, as we turn our focus toward delivering a strong second half."

Separately, Gap announced plans to enter India through franchise-operated Gap brand stores in 2015. The company is partnering with Arvind Lifestyle Brand Ltd., a subsidiary of Arvind Ltd. The first stores are expected to open in the country's two largest cities, Mumbai and Delhi, starting with Gap's Summer 2015 collection for adults, kids and babies. The brand plans to open about 40 franchise-operated Gap stores in India.

Gap shares are currently gaining 1.12% in after hours trading after closing the day's regular trading session at $43.18, up 7 cents. The shares trade in a 52-week range of $36.13 to $44.59.

Gap offers apparel, accessories, and personal care products for men, women, children, and babies under its namesake, Old Navy, Banana Republic, Piperlime, and Athleta brand names. Its products include assortments, such as denim, khakis, outerwear, tees, and accessories; maternity apparel; women?s loungewear, sleepwear, intimates, and sports and active apparel; and handbags, shoes, jewelry, personal care products, and eyewear. Though the U.S. continues to be its largest market, the company is trying to expand its presence in Japan and China.

For the second quarter ended August 2, 2014, the San Francisco-based company reported net income of $332 million or $0.75 per share, compared to $303 million or $0.64 per share for the year-ago quarter.

The latest quarter results include a benefit of about $0.05 per share from a gain on the sale of a building owned but no longer occupied by the company.

On average, 34 analysts polled by Thomson Reuters expected the company to earn $0.69 per share for the second quarter. Analysts' estimates typically exclude special items.

The company had said earlier this month that it expected second quarter earnings to be in the range of $0.73 to $0.74 per share, including the benefit of about $0.05 per share from the gain on asset sale.

As previously announced, net sales for the second quarter rose 3% to $3.98 billion from $3.87 billion in the same quarter last year. Same-store sales were flat. Twenty-nine analysts had a consensus revenue estimate of $3.96 billion for the second quarter.

Operating margin for the second quarter improved to 14.2% from 13.5% last year.

The company raised its full-year 2014 earnings guidance to a range of $2.95 to $3.00 per share from its prior guidance of $2.90 to $2.95 per share, to reflect the $0.05 per share related to the gain on asset sale. Analysts currently expect the company to earn $2.95 per share for the full year 2014.