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Gap produced further evidence that a turnround at the US retailer was under way as it reported a quarterly sales increase and raised its profit forecast for the year.
For the three months to April 28, Gap reported net sales of $3.5bn, a 6 per cent rise compared with the same quarter a year ago. Comparable sales saw a 4 per cent increase.
The San Francisco-based company forecast that net income for this year would stand at between $1.78 and $1.83 a share, above initial projections of $1.75 to $1.80. Analysts, however, had estimated full-year earnings of $1.98 a share.
Gap has spent several years struggling to reverse declining sales in the US having lost its verve in fashion and marketing, according to analysts.
Shares in the retailer have rallied more than 40 per cent since the start of the year – the fourth-best performing stock on the S&P 500. Gap shares rose as much as 8 per cent in after-market trading on Thursday after closing down 2.9 per cent at $26.31.
Net income for the first-quarter stood at $233m, or 47 cents a share, compared with $233m, or 40 cents, a year earlier.
Gap spent more on short-term investments including marketing and operating costs in the first quarter as the company tried to reclaim its standing as a fashion leader. Operating expenses for the first quarter were $980m, up from $918m from the same period last year.
Analysts had deemed the company’s popular spring collection as the start of Gap’s turnround strategy in the US where the company has lost sales in recent years to competitors such as Hennes & Mauritz.
“During the quarter, we improved sales, grew earnings per share, and continued investing in the business to drive performance,” said Glenn Murphy, Gap’s chairman and chief executive. While Mr Murphy said he was pleased with the company’s progress, he acknowledged the company had “lots of work to do”.
Gap said last year it would close 21 per cent of its Gap-branded US stores in the next two years and triple its outlets in China by the end of 2012.
Comparable sales rose 5 per cent at the group’s Gap and Banana Republic brands in North America and 4 per cent at Old Navy. Total overseas revenues rose 13 per cent to $511m but sales fell 4 per cent at international stores.
Online revenue rose 18 per cent to $410m, the company said.