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Last Updated: Friday, 18 August 2006, 05:33 GMT 06:33 UK
Falling sales hit profits at Gap
Gap store
Gap is struggling against falling sales
Clothing giant Gap has posted a 53% drop in quarterly profits, hit by declining sales, extensive price cuts and higher advertising costs.

Reporting its results for its second quarter ending 29 July, its net profit fell to $128m (68m) from $272m for the same period last year.

Gap added that its August performance had also been poor so far, and it cut its full-year profit target.

Its shares have dropped 20% over the last year as it continues to struggle.

Gap's overall quarterly sales were flat at $3.72bn, but those at stores open at least a year - a key gauge of retail performance - fell 5%.

'Lousy'

Analysts said the results were undeniably grim.

Gap is continuing to lose relevancy in the marketplace
Analyst CL King

"If you do lousy in August you're going to do lousy in the fall," said CL King of Mark Montagna.

"That means Christmas will likely be very poor."

Mr King added that Gap was struggling from increased competition from rival stores offering similar product lines.

"They [Gap] are continuing to lose relevancy in the marketplace," he said.

Gap's results also include the performance of its Banana Republic, Old Navy and Forth & Towne outlets.

For the full-year it now expects operating profit margins to fall to about 8.5% to 9%, below an earlier forecast of 10.5%.


SEE ALSO
Wal-Mart unveils drop in profits
15 Aug 06 |  Business
US consumers spend more in July
11 Aug 06 |  Business

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