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Gap raises outlook after stronger 3rd quarter

In this May 14, 2012 photo, shoppers walk by the GAP store at a shopping mall in Peabody, Mass. Gap Inc. announced Thursday, Nov. 15, 2012, it is raising its outlook for the year after its third-quarter net income rose 60 percent from a year ago. (Elise Amendola / Associated Press)
Associated Press

NEW YORK (AP) — Gap Inc. raised its outlook for the year after reporting stronger third-quarter net income that beat Wall Street expectations on Thursday.

The San Francisco-based clothing retailer said an uptick in sales at its Banana Republic, Old Navy and namesake stores helped lift its net income by 60 percent for the period. The performance is the latest sign that the company may be in turnaround mode, fueled by strong marketing and a revamping of its products.

Last month, Gap also announced a management overhaul aimed at enabling it to respond more quickly to changing tastes around the world. The change, to take effect in February, will put the North American, international, online, outlet and franchise divisions under a single global executive for each of the company’s brands. The company is also forming a new innovation and digital strategy team to further advance its efforts in that area.

For the quarter, the company said revenue at stores open at least a year for the period rose 6 percent in North America. The figure is a key measure of a retailer’s health, because it excludes the volatility of newly opened and closed locations. The figure rose 7 percent at Gap, 6 percent for Banana Republic and 9 percent for Old Navy, after each of the brands logged declines in the year-ago period.

Net sales for the online division rose by 23 percent to $509 million. International sales rose by 7 percent.

CEO Glenn Murphy said the results highlight how its lineup is resonating with customers.

“We are ready to compete and win this holiday season as we drive to build upon our top line growth,” Murphy said.

For the three months ended Oct. 27, the company said it earned $308 million, or 63 cents per share. That’s compared with $193 million, or 38 cents per share, in the year-ago period. The per-share results got a 2-cent boost from a reduction in the number of outstanding shares.

Total revenue rose 8 percent to $3.86 billion, from $3.59 billion last year.

Analysts, on average, expected a profit of 62 cents per share, on revenue of $3.84 billion, according to FactSet.

The company now expects earnings per share of $2.20 to $2.25 for the full year, up from the previous forecast of $1.95 to $2 per share. Wall Street was forecasting $2.25 per share, on average, with estimates ranging from $1.85 to $2.38.

Gap shares rose $1.19, or 3.6 percent, to $34.45 in after-hours trading.