Gap profit soars 25% in quarter, plans for promotional holiday

San Francisco Gap's profit climbed 25% compared with last year, fueled by inventory controls and strong sales at its value-oriented Old Navy division.

Gap earned $307 million during the three-month period that ended Oct. 31, versus a profit of $246 million a year earlier. Sales climbed 0.8% to $3.59 billion. It was the company’s first quarterly sales increase since early 2007.

Same-store sales in Old Navy stores rose 10% after sliding for at two years.

The chain said it would continue its recent marketing blitz during the holidays, including a new TV campaign for the Gap brand. Gap also said it will offer deep holiday discounts to lure shoppers away from competitors.

"We know the customer is really looking for value,” CFO Sabrina Simmons told investors during a conference call Thursday. "So we're going to play hard and you'll see us really competing over Black Friday for those dollars."

In others news, Gap said Thursday that its board has authorized it to buy back $500 million in shares and that designer Stella McCartney will create a second line of children's and baby clothing for GapKids and babyGap stores. The line is to launch in March.