SAN FRANCISCO – Aggressive cost cutting and restructuring helped Gap Inc. post a second-quarter profit that surged 19 percent, allowing the struggling clothing retailer to match Wall Street’s tepid expectations.
Gap reported profit for the quarter ended Aug. 4 of $152 million, or 19 cents per share, compared with $128 million, or 15 cents per share, in the year-ago period.
Second-quarter revenue declined 1 percent to $3.69 billion. Comparable-store sales – a key gauge of a merchant’s health – crumbled 5 percent, though online sales surged 26 percent and the company increased its profit forecast for the year and expanded its stock-repurchase program.
Analysts surveyed by Thomson Financial expected the San Francisco-based retailer, which operates more than 3,100 stores in the U.S., Canada, Europe and Japan, to earn $135.9 million, or 19 cents per share, on revenue of $3.72 billion.
The second-quarter results come less than two months after the appointment of Glenn Murphy as chairman and chief executive. Murphy, who previously served years as chairman and CEO of Canadian drug chain Shoppers Drug Mart, replaced Paul Pressler, a former Walt Disney Co. executive who ended his nearly 4 1/2-year stint at Gap after a miserable holiday shopping season.
“We have a lot of work ahead of us,” Murphy said in a statement. “But we have great brands with enormous potential, and I feel confident that our creative talent and dedicated store employees will help fuel our progress.”
The company raised its forecast for 2007. It expects to earn 83 cents to 88 cents per year, up from previous estimates of 76 cents to 86 cents per share.
Gap also announced an additional $1.5 billion stock buyback, part of a continuing share-repurchase program. The company repurchased 11 million shares worth $200 million in the second quarter, completing a $750 million buyback that began a year ago.
