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Gap Earnings More Than Triple From 2002

2:41 PM, Aug 22, 2003   |    comments
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SAN JOSE, Calif. (AP) -- Financial troubles for Gap Inc. appear to be easing. The clothing retailer reported second-quarter earnings that more than tripled and sales that jumped 13 percent over last year. For the three months ended Aug. 2, Gap earned $209 million, or 22 cents per share, compared with profits of $57 million, or 6 cents per share, in the same period last year. That beat by a penny analysts' expectations of profits of 21 cents per share, according to a survey by Thomson First Call. Sales rose to $3.7 billion from $3.3 billion in the second quarter last year. Same-store sales, which measure the performance of outlets open at least a year, jumped 10 percent, compared with last year's decrease of 7 percent, the company said Thursday. The figure is considered the best barometer of a merchant's health. Executives attributed the gains to summer marketing at its namesake stores and Old Navy, which Gap also runs. Better product assortments and inventory management also resulted in more sales at better margins, executives said. "We're very pleased with our momentum and the increased customer acceptance of our merchandise and marketing - our strategies are clearly gaining traction," said Gap chief executive Paul Pressler. Gap's turnaround started last fall after 29 consecutive months of slipping same-store sales as its stores returned to more basic fashions that fueled its rapid expansion and popularity in the 1990s. It's now posted 10 consecutive months of same-store sales increases. Pressler, a former Walt Disney Co. executive, was hired by Gap in September to lead the retailer's recovery. Analysts credit much of the Gap's improvement to the previous management team led by Millard "Mickey" Drexler, who now leads the rival J. Crew Group. Analysts said Gap appears to be experiencing a strong back-to-school season. Merchandise and strong advertising should continue to drive strong earnings, said Jennifer E. Black, an analyst at Wells Fargo Securities, in a recent research note. Executives said they are pleased so far with the results of a Gap ad campaign featuring pop stars Madonna and Missy Elliott with so-called cord jeans. Ads started airing July 30. "Though it's still too early to analyze results of the campaign, traffic was up following the launch and cords are selling above expectations month to date," Pressler said. For the first six months of Gap's fiscal year, the retail earned $412 million, or 44 cents per share, compared with $93 million, or 11 cents per share, in the same period last year. Net sales were $7.04 billion, compared with $6.16 billion in the same period last year. San Francisco-based Gap released its results after close of markets. Shares closed 22 cents higher, to $19.65, in Thursday trading on the New York Stock Exchange. In the extended session, they gained $1.37, or nearly 7 percent.

Associated Press

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