By Tess Stynes
Gap Inc. cut its earnings guidance for the year ahead of the
crucial holiday selling season, even as the apparel retailer's
earnings topped expectations for the November quarter.
For the year ending in January, Gap lowered its per-share
earnings estimate to $2.73 to $2.78, from its previous estimate for
$2.95 to $3. Gap also cut its capital spending outlook to $700
million, a decrease of $50 million.
"As we move into the holiday season, our teams are focused on
delivering unique customer experiences which will differentiate our
portfolio of brands in the marketplace," Chairman and Chief
Executive Glenn Murphy said in a news release.
The San Francisco retailer has been striving to reinvigorate the
its namesake brand. However, a string of sales declines has
persisted at the Gap brand, despite the September launch of a much
touted merchandise and marketing effort.
In an effort to combat sluggish demand, retailers have continued
heavy discounting and promotions to attract shoppers, a practice
that resulted in a highly competitive atmosphere and weighed on
margins.
Last month, the company said Mr. Murphy would step down next
year as CEO of the retailer, where he reversed a long-running sales
slump but more recently has struggled to reinvigorate the company's
namesake brand. Art Peck, a nine-year veteran who helms Gap's
digital division, was tapped as his successor.
For the period ended Nov. 1, Gap reported a profit of $351
million, or 80 cents a share, up from $337 million, or 72 cents a
share, a year earlier. The latest period included a benefit of six
cents a share, mostly related to foreign-tax credits. The company
estimated 78 cents to 79 cents a share earlier this month, topping
estimates at the time.
Gap recently reported its sales eased 0.1% to $3.97 billion,
while sales, excluding newly opened or closed locations, declined
2% as a drop of 5% at its namesake brand offset growth of 1% at Old
Navy. Sales were flat at Banana Republic.
On Thursday, Gap noted sales grew 1%, excluding currency
fluctuations, and the stronger dollar had a net negative impact of
about $31 million. The retailer recorded about 24% of its sales
revenue abroad in the latest period. Total online sales rose 5.4%
to $621 million.
Operating margin declined to 13.9% from 14.5%.
At quarter's end, inventory dollars per store fell 2% from a
year earlier, compared with expectations for an increase in the
low-single digits on a percentage basis.
Write to Tess Stynes at tess.stynes@wsj.com
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