Gap (GPS) Tops Q2 Expectations on Strong Comps; Now, About that Guidance...

August 16, 2012 4:27 PM EDT
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Price: $24.20 +1.38%

EPS Growth %: -1.6%

Financial Fact:
Net sales: 3.8B

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The Gap Inc. (NYSE: GPS) shares are higher in late-trading Thursday following strong second-quarter results, but issued earnings expectations that might leave investors as blue as the denim it sells.

Net sales rose 5.6 percent to $3.58 billion in the quarter, from $3.39 billion in the same period last year. Comps rose 4 percent in the quarter.

Net income saw a 28.6 percent jump to $243 million, or 49 cents per share.

Numbers compare with Street expectations of $3.54 billion in sales and EPS of 48 cents.

On compes, Gap reported the following breakdown:
  • Gap North America: positive 7 percent versus negative 3 percent last year;
  • Banana Republic North America: positive 7 percent versus negative 2 percent last year;
  • Old Navy North America: positive 3 percent versus flat last year; and
  • International: negative 5 percent versus negative 4 percent last year
Gap added net 9 new stores in the quarter, bringing its total to 3,285 locations.

Despite the positive results, Gap can't seem to lift guidance enough for investors' liking. Last quarter, the retailer boosted its FY12 EPS outlook from $1.75 to $1.80 to a new range of $1.78 to $1.83 and the Street's view of $1.98.

Today, Gap raised that range to $1.95 to $2.00, shy of the $2.08 expected.

Shares are up about 0.5 percent in late trading.

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