Gap Backs Earnings Guidance

Gap Inc. on Thursday affirmed its earnings projections for the year, while reporting earnings and sales for the second quarter that matched the downbeat outlook it gave earlier this month.

The San Francisco-based apparel retailer said it expects to record about $130 million to $140 million in charges for the year as part of its overhaul of its struggling namesake brand. That projection is down from its earlier estimate of $140 million to $160 million.

Gap, which has more than 3,700 stores under brands that include Old Navy, Banana Republic and its namesake division, has been trying to revamp the struggling Gap brand, following a series of fashion mis-hits and miscalculations. It brought on new leadership, including former Banana Republic veteran Wendi Goldman, who once led Victoria's Secret Pink line, and it disclosed in June plans to eliminate 250 corporate jobs, mostly in North America, and close 175 North America Gap stores, with the bulk—140 stores—to be closed by Jan. 30.

The company has previously said the planned store closings would lower its sales for the year ending Jan. 30 by about $300 million.

Underscoring the woes at Gap, the company gave a disappointing forecast for the second quarter earlier this month, pointing to weakness at its namesake and Banana Republic brands. Sales, excluding newly opened or closed locations, dropped 6% at Gap and 4% at Banana. The Old Navy division continued to be a bright spot, with sales rising 3%.

In all, for the 13 weeks ended Aug. 1, Gap reported a profit of $219 million, or 52 cents a share, down from $332 million, or 75 cents a share, a year earlier. Excluding charges related to the Gap brand overhaul, profit was 64 cents a share. Net sales fell 2% to $3.9 billion.

Both the bottom- and top-line results matched the company's forecast from Aug. 10. Ahead of that preliminary report, analysts had projected earnings of 66 cents a share and sales of $3.97 billion.

Gross margin, meanwhile, narrowed to 37.4% from 39.4% a year earlier.

Write to Maria Armental at [e-mail]

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(END) Dow Jones Newswires

August 20, 2015 16:25 ET (20:25 GMT)

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