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Gap profit slides sharply
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August 16, 2001: 5:48 p.m. ET
Apparel retailer beats by a penny, but logs slower sales, heavy markdowns
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NEW YORK (CNNfn) - Gap Inc. posted a 43 percent drop in second-quarter results Thursday, and warned about third-quarter earnings, as the nation's biggest apparel retailer came in a penny ahead of Wall Street expectations.
For the quarter ended on Aug. 4, the operator of Gap, Old Navy and Banana Republic stores reported earnings before one-time items of 12 cents a share, compared with earnings of 21 cents a share a year earlier. The company did not provide a dollar figure excluding items. Analysts on average anticipated a profit of 11 cents a share, according to earnings tracker First Call.
Including restructuring charges related to 1,300 job cuts that were announced last week, Gap earned net income of $90 million, or 10 cents a share.
The company also warned that third-quarter results could fall below 21 cents a share as same-store sales are expected to fall within the negative mid-single-digit range. Wall Street had been expecting 26 cents a share, according to First Call.
Second-quarter revenue increased 10 percent to $3.2 billion from $2.9 billion, but sales at stores open at least a year, a key retailing gauge, slipped 9 percent in the quarter. The biggest sales drop came at the company's Old Navy division, where same-store sales declined to the negative mid-teens compared with negative low double-digits a year ago.
"So far in August we are experiencing a continuation of July's difficult sales trends," Heidi Kunz, the company's chief financial officer, said in a statement.
"Our challenge in the current market is to find the right balance between key items and fashion from both an assortment and presentation standpoint. This is our No. 1 priority," Gap CEO and President Millard Drexler said in a statement.
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San Francisco-based Gap (GPS: Research, Estimates) is hoping that its bet on denim this fall will help it reverse the lower sales it has logged as the economy has slowed and consumers have shifted away from basics to more fashion-oriented clothes offered by its competitors.
Same-store sales at Gap stores fell to the negative high single-digits compared with positive sales a year earlier. Gap International, Banana Republic and Old Navy all had negative same-store sales in the quarter.
Gap's shares ended down 25 cents at $23.35 Thursday. 
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Gap Inc.
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