US: Gap Q1 earnings come in at top end of guidance
- Q1 earnings drop 22%
- Gross margin erods 260 bps
- Sales edge up 1%
Gap's earnings decline was driven by a weak start to the quarter
US clothing giant Gap Inc has reported first-quarter earnings that came in at the high end of its recent guidance and above analyst estimates.
Gap reported earnings of US$260m, or $0.58 per share, in the three months ended 3 May. This was a 22% drop on earnings of $333m, or $0.71 per share, in the year ago period. It beat the firm's guidance of $0.56-$0.57, and was $0.01 above Stifel estimates.
The decline was driven by a weak start to the quarter, gross margin erosion of 260 bps, and by 5% from foreign exchange rate fluctuations.
Stifel analyst Richard Jaffe said: "Results improved as the quarter progressed, leading us to believe assortments are on-trend and the company is well positioned as it enters the second quarter."
Net sales for the first quarter edged up 1% to $3.77bn from $3.73bn last year. The translation of foreign revenues into dollars negatively impacted sales by around $20m in the quarter.
Comparable sales dropped 1% compared with a 2% increase last year.
Despite the declines, the company reaffirmed its guidance for fiscal 2014 diluted EPS to be in the range of $2.90 to $2.95.
Jaffe added: "Gap's continued focus on improving the omni-channel shopping experience and offering trend-right assortment is anticipated to drive comp gains long term. We reiterate our 'buy' rating and 12 month target price of $48."
The Gap Inc has demonstrated that it understands the direction of the apparel market, and is using its digital platforms in conjunction with its physical stores to drive growth. The company has benefi...
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The Gap is a US apparel specialist retailer which offers casual, mid-tier clothing. It continues to pursue a multi-tier price strategy, operating retail concepts (Banana Republic, Gap, Old Navy, Piper...
Gap Inc’s sales performance in 2012 highlights a successful turnaround is well underway. Innovative marketing combined with an omni-channel focus places the company well to regain lost market share. G...
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