Market Commentary and Intraday News

Gap soars after reporting stellar August sales

292 days ago

(AP:NEW YORK) Shares of Gap Inc. soared Thursday after the clothing chain reported stellar August sales results that exceeded Wall Street analysts' expectations.

THE SPARK: Gap reported that August revenue at stores open at least a year jumped 9 percent, as back-to-school shoppers headed into its chains, particularly Old Navy. Results soundly beat average analyst expectations of a 5.4 percent rise, according to Thomson Reuters.

The figure on revenue at stores open at least a year is a key statistic in measuring the health of a retailer because it excludes the effect of opening and closing stores. At namesake Gap stores, the figure rose 9 percent. It rose 8 percent at Banana Republic and 12 percent at Old Navy.

"Our August results underscore our focus to deliver trend-right product supported by great store execution," said Glenn Murphy, chairman and chief executive of Gap Inc., in a statement.

THE BIG PICTURE: Gap has struggled for years to reclaim its fashion status. But the latest results offer more confidence that a comeback, started in the first quarter, is taking hold.

Earlier in August, Gap reported a 29 percent increase in second-quarter net income, evidence the fashion retailer's moves to liven up its clothing with brightly colored trendy looks are winning over shoppers. Revenue at stores open at least a year rose 4 percent for the quarter ended July 28.

Gap has worked hard to turn around its business, from staff changes to new ad campaigns and partnerships with other designers. Among some of the standouts were a Gap Kids partnership with Diane Von Furstenberg and Banana Republic's partnership with AMC's hit show "Mad Men." The Banana Republic division also announced earlier in August that fashion designer Narciso Rodriguez will serve as an adviser to the brand beginning with the fall 2013 collection.

The Gap brand already had brought back Tracy Gardner as creative adviser. She's expected to make an imprint on holiday fashions, executives have said. Gardner, a former J. Crew executive, worked at Gap and Banana Republic in the late 1990s and early 2000s.

In April, the San Francisco company named Stef Larsson, former head of global sales for trendy fashion retailer H&M, as president of the Old Navy brand. He'll start by the end of October, replacing Tom Wyatt, who resigned in February.

THE SHARES: Investors have pushed Gap shares up more than 90 percent so far this year. On Thursday, shares hit a 52-week high and were among the biggest percentage gainers on the benchmark S&P 500. Shares rose nearly 4 percent, or $1.29 to $36.46 in afternoon trading. Over the past 52 weeks, shares have been trading anywhere from $15.08 to $36.60.

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