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Gap, Lands' End beat Street
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November 11, 1999: 11:31 a.m. ET
Retailers post improved earnings despite some sales softness
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NEW YORK (CNNfn) - Two leading clothing retailers, Gap Inc. and Lands' End Inc., beat Wall Street profit forecasts for the third quarter Thursday, although both lost ground in sales in their core businesses.
Gap (GPS), the San Francisco-based owner of the Gap, Banana Republic and Old Navy store chains, reported record sales and earnings growth for the quarter. It said net income rose 32 percent to $315 million, or 35 cents a diluted share, for the quarter ended Oct. 30, from $238 million, or 27 cents a share, a year earlier. Analysts had forecast profits of 34 cents a share, according to First Call, which tracks earnings estimates.
While there has been weakness in sales at stores open at least a year, called same-store sales, in some of its core divisions, the chain expects to fuel growth through an aggressive expansion plan.
Total sales jumped 27 percent to $3.05 billion from $2.4 billion.
But same-store sales fell slightly while GapKids sales were flat.
Robert Fisher, the son of the founders of the Gap clothing chain, announced his resignation, effective next Monday, as president of the Gap stores division and executive vice president of the holding company, although he will remain on the board. The company said he is leaving for personal reasons.
Banana Republic's same-store sales grew in the "high-single digits" while those at Old Navy rose in the low teens, which is below that chain's growth in the year-ago period. The company didn't provide details.
For the first nine months of its fiscal year, net income rose 40 percent to $713 million, or 79 cents a share diluted, from $511 million, or 56 cents a share, a year earlier. Sales grew 29 percent to $7.78 billion.
Expansion plans to fuel growth
Gap said it will continue its expansion plans to help drive sales and profit growth in the fourth quarter and next year. In the past nine months, square footage grew by 27 percent and the number of stores expanded 20 percent to 2,809 at the end of the quarter. It plans to add or expand 550 to 600 stores in fiscal 2000 in addition to about 100 more stores due to open or be expanded in the fourth quarter.
In a Thursday morning conference call, Heidi Kunz, the chain's CFO, said it is on track for a consensus fourth-quarter estimate of 44 cents a share in earnings, and is well positioned for a record year next year.
Lands' End changing gears
Direct marketer Lands' End (LE) posted net income of $8.8 million, or 28 cents a share diluted, in the quarter, beating the First Call estimate of 25 cents a share. Stronger Internet sales, coupled with a cut in catalog pages mailed and a drop in selling, general and administrative costs, helped it post the stronger results.
A year ago, the earned $204,000, or 1 cent a share, due partly to a $3.4 million after-tax loss due to foreign currency loss in that period.
Sales rose 1 percent to $326.0 million from $322.4 million a year ago. That modest growth was due to increased liquidations, from corporate sales, and from its children's catalog. But core business sales were down 4 percent in the quarter. International sales also were off 6 percent.
Internet sales increased two-and-a-half times in the quarter from a year earlier. For fiscal 1998, Internet sales were $61 million, or 4.5 of gross sales.
The company is cutting back the catalog pages it is mailing by 20 percent in a cost-saving measure as it tries to shift more to the Internet. But because of the cuts it previously announced, it expects sales in the fourth quarter to drop from last year's levels, although analysts anticipate a 36 percent rise in earnings per share to $1.45 in the period.
For the first nine months, the Dodgeville, Wis., retailer had net income of $19.7 million, or 64 cents a share diluted, compared with $5.5 million, or 18 cents, a year ago. Revenue rose 4.8 percent to $870.2 million. 
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