Shares of specialty apparel retailer, The Gap Inc. (NYSE: GPS) edged up in pre-market trade on Friday after the Company following the closing bell in previous session reported 60% jump in fiscal third-quarter earnings thanks to fatter margins and growing same-store-sales in North America.
GPS also boosted its guidance on fiscal 2012 earnings to $2.20-$2.25 a share from its earlier forecast of $1.95-$2.0 a share. However, analysts polled by Thomson Reuters were expecting full-year earnings to come at $2.27 a share.
The San Francisco-based Company started a turnaround plan last year by ousting its top designer even as it focused on international expansion. Thanks to improved merchandising and well thought out decisions with regard to opening of new stores and shuttering of underperforming ones, the company has now posted strong growth in earnings in last two consecutive quarters.
Last year, the company had decided to shutter one-fifth of its stores in North America over the course of two years as it believed to have an overextended store network in the U.S.
So far this year GPS has opened 107 new stores and shut 75 company-operated stores.
For the fiscal third quarter ended Oct 27, Gap reported a profit of $308 million or 63 cents a share compared to $193 million or 38 cents a share, in the year earlier quarter. The latest earnings also included a onetime gain of 2 cents a share arising from tax-related benefit.
Just few days ago, the company had forecasted earnings in the range of 61 to 63 cents, which was in line with analysts’ consensual estimate.
Sales during the period jumped 8 percent from the year earlier quarter to $3.86 billion.
Gross margin came at 41.2% up from year earlier quarter’s 36.7% as input costs remained stable. Operating expenses, in the meantime, soared 11%.
Same-store-sales, a key gauge on retailer’s performance, also rose for all three brands.
In North America, Gap same-store-sales climbed 7 %, for Banana Republic it rose by 6% while for Old Navy it leaped 9%. Same-store-sales in international markets grew by 3%.