By  on May 13, 1994

NEW YORK -- Strong sell-throughs of its fashion offerings helped The Gap Inc.'s earnings jump 53 percent in the first quarter ended April 30, surpassing Wall Street's estimates.

Earnings totaled $63.5 million, or 44 cents a share, up from $41.5 million, or 29 cents, a year earlier. Wall Street's average estimate for the latest quarter was 37 cents a share.

Sales climbed 17 percent to $751.7 million from $643.6 million. Same-store sales advanced 7 percent versus a 1 percent decline a year earlier.

Donald G. Fisher, chairman and chief executive officer, said the performance reflected a strong consumer response to its fashion merchandise, especially women's offerings.

"Merchandise margins improved significantly -- the result of higher initial margins and less promotional activity than in last year's first quarter," Fisher said.

Gross margins jumped to 38.5 percent of sales from 34.1 percent, while inventories declined 4.1 percent to $346.5 million, impressing Wall Street. "They continued to get a continued good response to Gap fashion and that drove merchandising margins up," said Thomas H. Tashjian, at First Manhattan Co., pointing out that fashion merchandise typically carries much higher prices and margins than basics.

Gap Kids and Banana Republic outperformed the Gap stores, but all divisions racked up strong performances, analysts said.

"Every part of the business across the board was strong, particularly sales and margins," said Barry Bryant, an analyst at Ladenburg, Thalman & Co.

Bryant said women's fashion apparel in particular boosted margins at the Gap stores chain and Banana Republic.

The Gap's same-store sales were estimated to have risen about 5 percent. Analysts said this division was helped by tight control over expense and inventory, with margins benefiting from more women's fashion offerings.

Tashjian said the company's new Workout activewear line, which is now in 300 Gap stores, shows the company's ability to differentiate its core basic offerings to gain higher price and margins. The Gap chain has also introduced shoes in about 100 stores.

Banana Republic is estimated to have shown a same-store gain in the high teens, with margins also benefiting from a good response to additional women's fashion offerings.

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