Gap shares rise after surpassing Q2 estimates

Published on: 18 Aug, 2017

Shares of Gap Inc. (NYSE: GPS) rallied more than 6 percent in extended-hours trading after the retailer reported better than expected second quarter results and raised its full-year profit forecast on Thursday, Reuters reports.

The company’s net income rose to $271 million, or 68 cents per share, from $125 million, or 31 cents per share. The latest quarter included a $64 million gain from insurance proceeds, while the year-ago quarter included $135 million in restructuring costs. Excluding the insurance-related gains, Gap earned 58 cents per share, easily beating analysts' estimate of 52 cents.

The company's overall same-store sales increased 1 percent in the three months ended July 29, while analysts were expecting sales to be flat year-over-year. Same-store sales at Old Navy rose 5 percent, beating analysts' estimate of 3.1 percent. Old Navy's sales have now risen in seven of the past ten quarters, a bright spot for the company as its Gap and Banana Republic brands struggle.

The retailer’s total revenue fell 1.4 percent to $3.799 billion, edging past analysts' estimate of $3.77 billion. Gap raised its adjusted profit forecast for fiscal 2017 to $2.02 to $2.10 per share from $1.95 to $2.05.

The results mirror a trend among U.S. retailers: department stores such as Macy's Inc (NYSE: M) and J.C. Penney Co Inc (NYSE: JCP) have struggled, while apparel retailers like Ralph Lauren Corp (NYSE: RL) and Urban Outfitters (NASDAQ: URBN) have benefited as they better managed inventory and gave fewer discounts.

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Austin Chiu

Email: Austin@financialinsiders.com

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