Gap posts 5% July, 2Q sales drop; raises FY08 guidance

SAN FRANCISCO Gap reported net sales of $998 million for the four-week period ended Aug. 2, a decrease of 5% from $1.05 billion for the same period last year. Comparable-store sales for July 2008 decreased 11%, compared with a 7% decrease for July 2007.

Gap comps were down 6%, versus a positive 2% last year; Banana Republic came in at negative 8%, versus positive 1% last year; Old Navy posted a 16% comps drop, versus an 18% drop last year and international comps dropped 9%, versus being up 11% last year.

“In July, we focused on clearing through remaining summer product and preparing our stores for fall deliveries,” said Sabrina Simmons, cfo of Gap Inc. “We’re pleased that we delivered merchandise margins significantly above last year.”

For the 13-week second quarter ended Aug. 2, total company net sales were $3.5 billion, a decrease of 5% from $3.69 billion for 2007. Second quarter comparable-store sales decreased 10%, compared with a decrease of 5% in the second quarter of the prior year.

Gap's second-quarter comps decreased 6%, the same as in 2007; Banana Republic posted comps down 6%, versus up 4% last year; Old Navy had negative 16% comps, versus negative 9% last year and international comps came in at negative 6%, versus positive 3% last year.

Gap expects diluted earnings per share on a GAAP basis for the second quarter to be between 30 and 31 cents. It is increasing its guidance for earnings per share on a GAAP basis for fiscal year 2008 to $1.30 to $1.35 from its previous guidance of $1.20 to $1.27.