Gap Profit Up 25%; Lifts Outlook

(RTTNews) - Fashion retailer Gap Inc. (GPS), Thursday reported a 25 percent jump in second-quarter profit, as customers splurged on its merchandise assortments. Earnings for the quarter were in line with Wall Street estimates, while revenues beat expectations.

The company, which has been expanding its product range and redoing its stores, lifted its earnings outlook for fiscal year 2013 and increased its annual dividend by 20 cents to 80 cents a share.

"We delivered strength in both our top and bottom lines this quarter," said CEO Glenn Murphy. "As we move into the second half of the year, we remain focused on growing revenue and driving continued momentum across our portfolio of brands."

Gap offers apparel and accessories under its namesake, Old Navy, Banana Republic, and other brand names. While the U.S. continues to be its salient market, Gap is making inroads into Japan and China.

The San Francisco-based company posted quarterly net income of $303 million or $0.64 per share, compared with $243 million or $0.49 per share last year.

On average, thirty-two analysts polled by Thomson Reuters expected earnings of $0.64 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter grew 8 percent to $3.87 billion from $3.58 billion in the prior year. Twenty-nine analysts had a consensus revenue estimate of $3.83 billion for the quarter.

On a same-store basis, sales were up 5 percent.

Gross margin for the quarter grew 60 basis points and operating margin was up 160 basis points, compared with a year ago.

For fiscal 2013, Gap now expect earnings of $2.57 to $2.65 per share, up from prior range of $2.52 to $2.60 per share. Analysts currently expect earnings of $2.78 per share for the year.

Gap ended the second quarter with 3,444 store locations, 3,106 of which were company-operated. In fiscal 2013, it plans to open about 160 company-operated stores.

Gap shares closed Thursday at $41.99, down $0.69 or 1.62%, on a volume of 4.9 million shares. In after-hours, the stock fell $0.01 or 0.02%.