Gap Inc. (San Francisco) is forecasting its first quarterly profit in nine months and said April sales were not as weak as expected.
Some analysts are optimistic about a rebound in profits, now that Gap is turning out more appealing clothes after a string of merchandising missteps. However, sales declines in the company's Gap and Old Navy divisions prompted credit rating agency Standard & Poor's to lower its outlook on the retailer to negative from stable.
Gap said April sales at stores open at least a year fell 24 percent, marking the 25th straight month of declining same-store sales. The retailer had braced for a decline of 30 percent, cfo Heidi Kunz said.
Based on its April performance, Gap forecast first-quarter earnings of 2 cents to 3 cents a share, its first profit since the second quarter of 2001.
Gap — which operates more than 4200 stores, including the Gap, Banana Republic and Old Navy chains — said total sales for the four weeks ended May 4 were $962 million, down 17 percent from the same period a year earlier. Gap said April same-store sales fell 27 percent at Old Navy, 26 percent in its Gap domestic division, 21 percent in its Gap international division and 13 percent at Banana Republic.
“April was a transitional month for the Gap brand, as the focus was to clear through spring merchandise to make room for receipts of summer,” said Kunz.
Gap has vowed to win back customers by reviving classic designs, a strategy that should be fully apparent by autumn, when, some analysts believe, the company's streak of declining same-store sales will end.