Gap strong in Q2, raises outlook

Gap Inc. beat the Street in its second quarter with both bottom and top line gains, boosted by its Old Navy division and fewer discounts.



The apparel retailer earned $271 million net income, or 68 cents per share, in the quarter that ended July 29. That's up from $125 million, or 31 cents per share, a year ago.



Excluding a one-time insurance gain related to a fire in 2016 at a Gap distribution center in Fishkill, New York, the retailer earned 58 cents per share. Analysts has expected earnings per share of 52 cents.



Total revenue fell 1.4% to $3.8 billion, just edging past analysts' estimate of $3.77 billion. (The translation of foreign currencies into U.S. dollars negatively impacted the company’s net sales for the second quarter of fiscal year 2017 by about $37 million.)



Same-store sales edged up 1% for their third consecutive quarterly increase. By brand, same-store sales rose 5% at Old Navy Global and fell 1% at Gap Global. Same-store sales fell 5% at Banana Republic Global.



“With a third consecutive quarter of comp sales growth, we are seeing our investments in product, customer experience, and brand equity begin to pay off,” said Art Peck, president and CEO, Gap Inc. “Based on the strength of the first half, we are pleased to increase our full year earnings guidance.”



Looking ahead, Peck said the company will focus on product categories that have clear differentiation. It also will continue to invest in its online and mobile offering, and take advantage of its operating scale to drive speed to market and responsiveness.



Gap raised its adjusted profit forecast for fiscal 2017 to $2.02 to $2.10 per share from $1.95 to $2.05 per share.



The company ended the quarter with 3,642 store locations in 47 countries, of which 3,179 were company-operated.