Gap profits sink by 51%

Gap profits fall short in the first quarter

US clothes retailer Gap has reported that its first quarter profits fell by 51%, as it continues to struggle against slow sales.

The company said its net income for the quarter was $115m, or 13 cents a share, compared with profit of $235m a year ago.

However, the results came in at the high end of analyst expectations. In March, Gap said its profits would be between 10 and 15 cents, before then revising its outlook upwards.

The retailer, which has more than 3,600 stores across the world, posted net sales of $3.2bn, a 16% increase on last year's $2.7bn.

First quarter sales have averaged 23% over the past three years.

Comparable sales - for stores open at least a year - fell 7% compared with a decline of 2% last year. These comparisons usually best reflect a retailer's health.

'Making progress'

"We're making progress, but business is still challenging," said Millard S. Drexler, president and chief executive officer.

"We are focused on offering customers the newness they expect when they shop our stores."

Gap Chief Financial Officer Heidi Kunz added that shoppers are warming to Gap's summer offering.

The company has also made some progress cutting expenses and inventory.

Gap's first quarter ended on 5 May.

Past disappointments

Last quarter Gap reported a fresh slump after sales slid 12% during January.

Gap has reported additional problems with its performance in the past.

In August 2000, a drop in sales was partly attributed to the mistaken strategy of targeting the teenage market with its Old Navy stores.

Over the past few years, Gap has also been targeted by anti-globalisation protesters.

They allege that the retailer exploits labourers in the third world through the manufacture of its clothes.

The Gap group includes the Gap brand, as well Banana Republic and Old Navy stores in the US.