Gap Inc. Thursday reported lower fourth-quarter earnings as sales at its Old Navy, Banana Republic and namesake Gap stores declined, and the company cut its full-year forecast.
The San Francisco-based apparel retailer reported earnings of $337 million, or 39 cents per share, compared with $378 million, or 40 cents per share, for the period last year.
Results were in line with the average forecast of analysts surveyed by Reuters Estimates.
Looking ahead, the company gave a full-year earnings forecast of $1.23 to $1.27 per share, citing uncertainty around the timing of its turnaround, the fact that month-to-date traffic is down 13 percent in February, and its expectation that total comparable store sales will remain negative in the first half of fiscal 2006.
The outlook includes an estimated charge of about 3 cents per share related to stock option expensing.
Analysts on average expected Gap Inc. to earn $1.35 per share for the year, according to Reuters Estimates, .
“This is a business in the middle of a turnaround,” said Joseph Beaulieu, an analyst with investment research firm Morningstar. “It’s no surprise they had pretty miserable comps for the fourth quarter.”
Fourth-quarter net sales slipped 2 percent to $4.82 billion and the company’s main business units also showed declines. Sales at North American Banana Republic stores open at least a year were down 5 percent after dropping 7 percent in the third quarter and sliding 1 percent in the year-ago fourth quarter.
The company said it plans to boost its cash dividend by 78 percent, to 32 cents per share, in 2006 and its board has authorized an additional $500 million for its share repurchase program.
Morningstar’s Beaulieu applauded the move.
“I’m pleased to see the company continue to buy back shares and significantly boost dividends,” he said. “This is a company that has recognized that it’s not in a growth phase any more and they’re returning cash to shareholders in significant quantities.”
Gap Inc. president and chief executive Paul Pressler said in a statement: “This announcement reflects our confidence in the company’s ability to continue generating strong cash flow.”
