GAP'S NET JUMPS 55% IN QUARTER

Byline: Jennifer L. Brady

SAN FRANCISCO--More fashion merchandise and fewer promotions drove The Gap Inc.'s earnings up 55 percent in the second quarter on a 11.5 percent sales climb.
Gap stock surged 4 3/8 to 41 1/4 Thursday on the New York Stock Exchange.
Earnings hit $44.4 million, or 30 cents a share, in the quarter ended July 30, narrowly beating Wall Street estimates of 28 to 29 cents. Last year, the retailer earned $28.7 million, or 20 cents. Gross margins grew to 34.3 percent from 28.9 percent a year ago. Sales climbed to $773 million from $693 million. Same-store sales edged up 1 percent.
In the half, earnings soared 54 percent on a sales hike of 14 percent, with same-stores sales up 4 percent.
Donald G. Fisher, chairman and chief executive officer, attributed the increased profits to less promotional activity and increased emphasis on fashion merchandise.
"I suspect that women's fashion is driving the Gap store business," said Barry Bryant, of Ladenburg, Thalmann & Co. Inc., noting a switch to a higher percentage of fashion-forward styles from basics.
Even though The Gap had easy comparisons against last year's quarter, Bryant said he was impressed with the earnings, given that the company cut its promotions significantly.
Bryant added that the company has succeeded in differentiating its higher-priced Banana Republic division from the lower-priced Gap stores.
--Fairchild News Service

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