Gap Reports Downbeat Profit Guidance, Drop in September Sales

By George Stahl 

Gap Inc. said total sales in September fell 1%, hurt by the stronger dollar and weakness at Banana Republic, and gave downbeat guidance on the company's expected profitability in the current quarter.

The retailer said it now expects its gross margin rate for the third quarter to be similar to the second quarter. In the July quarter, Gap had a gross margin of 37.4%; analysts were expecting 39.6% for the current quarter.

Shares of Gap, down 31% over the past 12 months, fell 5.1% to $27.47 in after-hours trading.

Total sales for five weeks ended Saturday was $1.46 billion, down from $1.48 billion a year ago. On a constant-currency basis, September sales rose 2% from a year ago.

Chief Financial Officer Sabrina Simmons called the month "challenging" in the company's news release.

Excluding stores newly opened or closed, sales at all Gap stores slipped 1%, better than the 1.6% drop estimated by data tracker RetailMetrics.

At the company's different specific brands, same-store sales were flat at the namesake Gap stores, fell 10% at Banana Republic and rose 4% at Old Navy.

RetailMetrics had projected same-store sales to drop 5.6% at Banana Republic and rise 5.6% at Old Navy.

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(END) Dow Jones Newswires

October 08, 2015 17:15 ET (21:15 GMT)

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