Gap Inc successfully posted a 19% rise in quarterly earnings despite sluggish sales at stores open more than a year, helped by cost-cutting and announced plans for a $1.5bn share buyback program.
In the fiscal second-quarter, Gap’s net income mounts to $152 million, or 19 cents a share, from $128 million, or 15 cents a share, a year earlier. In the quarter, firm’s Gross profit margins increased to 34.3%, up 1.3 points on the prior-year period, partly helped by less discounting, whereas operating margin was 6.1%, and the company expects it to be in the high single digits for fiscal 2007. Quarter was a little picky about the sale as Gap experienced 1% falls overall.
Buoyant with the quarterly result, Gap is expecting higher earning. For fiscal 2007, Gap raised its adjusted earnings outlook to 90 cents to 95 cents a share from 80 cents to 90 cents.
Despite posting overwhelming profit, firm is looking to double it next time. In the previous quarter Gap’s sales were the worrying factor, but now firm is trying to solve the problem and striving to reverse a multiyear sales slump. Company asserts that it has begun to improve merchandise and is now more carefully targeting consumers.
To reverse the sales slump, firm has announced plans for a $1.5 billion share-buyback program, which will include about $250m in shares bought from members of the Fisher family, which owns some 17% of outstanding Gap shares. Analysts see it as a major futuristic plan to reverse the sale slump, which will give board a better place to implement new plans.
Meanwhile, quarter results also boost Gap’s market value as while trading shares rose 1% to $17.60, after closing on the New York Stock Exchange at $17.40, down 8 cents. Shares of Gap have fallen 9 percent in 2007.
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Via: USA-Today
