US: Gap earnings down and cautious on FY forecast
- Q4 earnings drop 12.5%
- Sales down 3.2%
- FY EPS to be hit by weak currency
Gap said it expects its EPS growth rate to be negatively impacted by weakening foreign currencies
Clothing giant Gap Inc saw earnings drop in its fourth-quarter and said it expects weakening foreign currencies to hit earnings for the full year.
Net income in the three months ended 1 February dropped 12.5% to US$307m from $351m a year earlier.
Sales were down 3.2% to $4.58bn, while comparable sales edged up 1% compared with a 5% increase in the fourth quarter of last year.
Both earnings and revenues were negatively impacted by the loss of a 53rd week in the 2013 figures and heavy discounting over the holiday period.
For the full year, Gap said it expects its EPS growth rate to be negatively impacted by around five percentage points, as a result of weakening foreign currencies. As a result, the company has forecast EPS to be in the range of $2.90 to $2.95
Nonetheless, Gap said it will open 30 additional namesake stores in China during fiscal 2014, in addition to debuting five Old Navy stores in the country.
RBC Capital Markets analyst Howard Tubin noted: "While a necessary evil this past holiday season, price promotions and discounts are not levers GPS management is happy about having to pull.
"CEO Murphy believes that "it all starts with the product" and offering compelling and differentiated assortments is the most effective way to drive the business. This is a sentiment with which we completely agree."
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