Gap's Old Navy Carnage May Be Finally Abating (GPS)

Gap Inc. (NYSE: GPS) may be seeing some cheer despite another round of lower earnings and revenues.  The clothing and apparel retailer posted earnings of $0.31 EPS, or $215 million.  This is down from $0.34 EPS a year ago and is slightly above the $0.30 estimates from Thomson Reuters.  Revenues were $3.127 billion, down from $3.38 billion a year ago while estimates were $3.14 billion.  Amazingly, at least some of the downward trends are abating.

Gross margin of 39.6% fell by 10 basis points for the first quarter compared with the prior year; and the company ended the first quarter with $1.7 billion in cash, cash equivalents, and restricted cash.

Gap still plans to open about 50 stores and close about 100 stores, and it noted that inventory per square foot was down 12% at the end of the first quarter.  Cutting and managing inventories were part of the plan, and that looks as though it is happening.

The company’s first quarter comparable store sales were down 8% from the drop of 11% a year ago.  What may be most important here is that the carnage with the deep double-digit drops in same store sales at Old Navy seems to be coming to roost.  Gap Stores North America saw a same store sales drop at -12% for the first quarter, 13% drop at Banana Republic, and “ONLY” a drop at -3% for Old Navy North America.

Shares closed marginally lower at $15.98, and shares are up at $16.30 after th2 earnings report; the 52-week trading range is $9.41 to $20.80.

JON C. OGG
May 21, 2009