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Gap cuts profit forecast as demand slows for Old Navy brand

A shopper walks down Fifth Avenue carrying a Gap shopping bag in New York
Apparel retailer Gap Inc cut its full-year earnings forecast as sales at the Gap brand continued to fall and demand for the cheaper Old Navy clothing slowed.

The company’s shares fell 4.4 percent in extended trading.

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Comparable-store sales fell 5 percent at Gap in the third quarter ended Nov. 1 while sales were flat at Banana Republic.

Comparable sales growth at Old Navy stores slowed to 1 percent from 4 percent in the preceding quarter.

Old Navy brand was Gap’s strong point in North America even when demand for its premium brands cooled.

The company cut its earnings forecast to $2.73-$2.78 per share from $2.95-$3.00 per share for the year ending February 2015.

Apparel sales in North America have been slowing as retailers slash prices to attract shoppers at a time when consumers cut back on discretionary spending.

Gap’s net income rose to $351 million, or 80 cents per share, in the third quarter from $337 million, or 72 cents per share, a year earlier.

The company said net sales fell slightly to $3.97 billion from $3.98 billion from a year earlier.

Analysts on average had expected a profit of 79 cents per share and revenue of $4.04 billion, according to Thomson Reuters I/B/E/S.

The company’s shares closed at $40.14 on the New York Stock Exchange on Wednesday.



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