Gap Q3 Profit Rises, But Misses View; Cuts FY Outlook

(RTTNews) - Apparel retailer Gap Inc. (GPS), on Thursday reported an increase in profit for the third quarter, reflecting lower tax rate and decline in sales costs. Nevertheless, revenues for the quarter dropped from last year, hurt mostly by the continued weak sales at its namesake brand. Both earnings and revenues for the quarter came in short of Wall Street estimates.

Moving ahead, the company lowered its annual financial outlook, sending its shares down about 4 percent in the extended trading hours.

San Francisco-based Gap said its third-quarter profit rose to $351 million or $0.80 per share from $337 million or $0.72 per share a year ago. Results for the quarter included a benefit of about $0.06 from a lower effective tax rate.

On average, 20 analysts polled by Thomson Reuters expected earnings $0.79 per share for the quarter. Analysts' estimates typically exclude special items.

Gap's sales for the quarter dropped to $3.97 billion from $3.98 billion a year ago. Wall Street analysts had a consensus revenue estimate of $4.04 billion for the third quarter.

Gap's comparable sales for the third quarter declined 2 percent, compared with a 1 percent increase last year, as same-store sales at Gap slipped 5 percent. Banana Republic comps were flat, while Old Navy reported positive 1 percent same-store sales.

Looking forward to the full year, Gap now expect earnings in the range of $2.73 to $2.78 per share, down from its prior outlook of $2.95 to $3.00 per share. Analysts currently expect Gap to earn $2.82 per share for 2014.

Separately, Art Peck, Gap's newly announced CEO-successor, announced his first executive changes in the company. Gap has promoted Jeff Kirwan, currently president of Gap's greater China business, as Global President for the Gap brand. Kirwan replaces Stephen Sunnucks, who'll leave Gap in December. Peck also promoted Andi Owen, who currently heads the Gap Outlet unit, as Global President for Banana Republic. Peck will take over the reins of Gap from Glenn Murphy on February 1.

GAP closed Thursday's trading at $40.14, up $0.60 or 1.52%, on the NYSE. The stock, however, slipped $1.64 or 4.09% in the after-hours trade.