Earnings Preview: Gap to report 2Q results

NEW YORK (AP) ? Gap Inc. is expected to report fiscal second-quarter results after the stock markets close Thursday that should show signs of a continued turnaround in its business.

WHAT TO WATCH FOR: Investors will want to know more details about what shoppers are buying and how Gap's moves to improve its fashions are working. They'll also be looking for any commentary on the financial health of the consumer.

The San Francisco-based operator of Banana Republic, Gap, Old Navy and Athleta chains has struggled for years to reclaim its former fashion status. Previous earnings results this year showed that it's beginning to get its fashion groove and draw more people to its stores. The company has stepped up its marketing and this spring and summer pushed trendy clothing like brightly colored jeans.

Gap has made major staff changes. In April, it named Stef Larsson, former head of global sales for H&M, as president of the Old Navy brand. He'll start by the end of October, replacing Tom Wyatt, who resigned in February.

Gap already had brought back Tracy Gardner as creative adviser. She's expected to make an imprint on holiday fashions, executives have said.

A February 2011 management shake-up ended with a new president for the Gap brand, and more than a year ago the chain's design director, Patrick Robinson, was ousted. Gap also established a Global Creative Center and consolidated its marketing in New York.

Meanwhile Gap has been expanding in other countries as it pares back its fleet of U.S. Gap stores by 34 percent by the end of 2013, compared with 2007, not including Gap Outlets. That will leave 700 Gap stores. The company plans to maintain its Old Navy stores in North America but make them smaller.

Gap said earlier this month that July sales at stores open at least a year jumped 10 percent, easily surpassing analysts' expectations, and it said second-quarter earnings would rise from last year's results. Analysts surveyed by Thomson Reuters had expected Gap's July same-store sales to grow 3.8 percent, but they rose nearly three times that fast. The company now expects earnings per share of 47 to 48 cents per share, up from 35 cents per share in last year's second quarter.

The figure on revenue at stores open at least a year ? or same-store sales ? is a key statistic in retailing because it excludes the effect of opening and closing stores.

The company's Gap stores posted a 13 percent increase in same-store sales, a reversal from last July's 6 percent decline. Banana Republic stores saw a gain of 8 percent compared with a 4 percent decrease last year, and Old Navy stores were up 12 percent from a drop of 3 percent a year ago.

For the second quarter, revenue at stores opened at least a year rose 4 percent. By division, the metric rose 7 percent at Gap and Banana Republic and 3 percent at Old Navy. International same-store sales fell 5 percent in the quarter despite a pickup in July.

WHY IT MATTERS: Gap is the nation's largest mall-based clothing chain, so its results provide insight into shoppers' willingness to spend.

WHAT'S EXPECTED: Analysts are expecting earnings of 46 cents per share on revenue of $3.57 billion, according to FactSet.

LAST YEAR'S QUARTER: The company earned 35 cents per share on revenue of $3.38 billion

Source: http://news.yahoo.com/earnings-preview-gap-report-2q-results-202026689--finance.html

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