What happened
Shares of Gap Inc (GPS +0.76%) were moving higher today, after the apparel chain posted better-than-expected results in its third-quarter earnings report and raised its guidance for the full year. As of 12:31 p.m. EST, the stock was up 5.9%.
Image source: Gap Inc.
So what
The parent of brands including Banana Republic, Old Navy, and Gap said that comparable sales increased 3% overall, driven by a 4% jump at Old Navy. Total net sales increased 1% to $3.84 billion, topping estimates at $3.8 billion, and earnings per share increased from $0.51 to $0.58, ahead of expectations at $0.54.
It was an all-around impressive showing as the company turned in its fourth consecutive quarter of positive comps. CEO Art Peck said, "We continue to make progress against the balanced growth strategy we outlined in September, driving efficiency at our more mature brands, while growing our footprint in the value and active space, and investing in our online and mobile experience."
Now what
Investors also cheered the improved guidance as management now sees full-year earnings per share of $2.08 to $2.12, up from a previous range of $2.02 to $2.10, and expects full-year comparable sales will increase in the low single digits, compared with a previous forecast of flat to slightly higher comps. With results significantly improved at Gap's namesake brand and Banana Republic, the company is effectively adjusting to shifting consumer habits. Still, operating income fell in the quarter, a sign that investments to adapt are weighing on the bottom line. A lower tax helped lift earnings per share.
Overall, today's jump seems more than justified as management is executing its turnaround strategy effectively.
