Photographer: Scott McIntyre/Bloomberg

Gap Keeps Comeback Hopes Alive by Meeting Earnings Estimates

Updated on
  • Shares gain after apparel chain says comparable sales rose 2%
  • CEO Peck cites strong finish during critical holiday season

Gap Inc., the largest U.S. apparel-focused retailer, posted fourth-quarter earnings that met analysts’ estimates, giving investors some hope that Chief Executive Officer Art Peck’s long-awaited comeback plan may be on track.

Profit was 51 cents a share in the quarter, excluding some items, the San Francisco-based company said in a statement Thursday. Gap said earlier this month that earnings would be 50 cents to 51 cents a share, with analysts expecting the higher figure, on average.

Investors have been waiting for signals that Peck’s turnaround plan is working. In December, comparable sales rose 1 percent at the flagship brand. That was Gap’s first increase in more than two years. Peck has also been cutting costs to try to offset declining foot traffic in malls and price slashing by competitors.

“We’re pleased to finish the year strong, with positive comp and sales growth during the critical holiday quarter,” Peck said in a statement.

Comparable-store sales, a closely watched measure, rose 2 percent in the quarter, compared with a drop of 7 percent in the same period last year.

The shares rose as high as 3 percent to $24.70 in late trading in New York. The stock had gained 6.8 percent this year through Thursday’s close.

Finance Chief

In November, Gap hired Teri List-Stoll as its next chief financial officer, turning to a former executive of Dick’s porting Goods Inc. and Kraft Foods Group Inc. List-Stoll stepped into a job being vacated by Sabrina Simmons.

Gap’s Banana Republic chain is still suffering. As part of a plan to shape up the division, it’s exiting the U.K. this year. The company will close all eight Banana Republic stores in the country, although customers can still order items through the chain’s regional website.

Gap also said on Thursday that it’s moving away from providing monthly sales updates. The shift means investors will have less visibility into Gap’s comeback efforts. But it’s far from alone in taking the step: Almost all other major retailers have already dispensed with monthly reports.

(Updates with monthly reports in last paragraph.)
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