Gap shares climb after profit exceeds expectations

Shares of Gap climbed Thursday after the retailer reported a quarterly profit that topped Wall Street expectations. (Photo: Gap/Facebook)

Shares of Gap climbed Thursday after the retailer reported a quarterly profit that topped Wall Street expectations.

The San Francisco-based company has struggled to adjust to changes in retail, with more consumers buying online, craving discounts and spending less time at the malls where the company’s Gap, Banana Republic and Old Navy stores are. A string of retailers have announced store closings in recent months.

“The retail environment continues to be challenging,” said CEO Art Peck in a statement Thursday. But he said Gap is improving its “product quality and fit” and getting better at reacting to changes in fashion trends.

Gap Inc. said in the February-April period, its fiscal first quarter, net income came to $143 million, or 36 cents per share, up from $127 million, or 32 cents per share, the year before. Wall Street had predicted earnings of 29 cents per share, according to the average estimate of 14 analysts surveyed by Zacks Investment Research.

Overall revenue was unchanged at $3.44 billion and beat Wall Street’s estimate of $3.41 billion. Revenue at stores open at least one year, a crucial retail metric, rose 2 per cent in the quarter, compared with a 5 per cent decline during the same period of 2016. Sales declined at Gap and Banana Republic but rose at Old Navy.

Gap left its earnings prediction for the year unchanged at $1.95 to $2.05 per share.

Its shares rose 2.4 per cent to $23.75 in after-hours trading Thursday. Gap shares had closed Thursday at $23.19, having climbed slightly more than 3 per cent since the beginning of the year. The Standard & Poor’s 500 index has risen nearly 6 per cent.