Gap Inc.’s fourth-quarter revenue grew by 3%, but it took improved sales at Old Navy stores to help offset a drop-off at the company’s namesake brand. Here are the key points from Thursday’s quarterly earnings report.
What you need to know: Comparable sales at Gap (GPS) improved 2% in the fourth quarter after growing 1% during the same period in the previous year. Overall, the company’s quarterly revenue improved 3%, to $4.71 billion. Gap also reported profits grew 4% year-over-year to $319 million, or 75 cents per share. Wall Street had been expecting quarterly earnings of 74 cents per share, which is also the high end of Gap previous’s forecast.
For the full fiscal year, Gap’s comparable sales were flat, which followed a 2% increase during the previous year. Full-year revenue grew 2%, to $16.4 billion. The company reported full-year profits that were down 1.4% to $1.26 billion, or $2.90 per share.
The company’s disappointing full-year comparable sales numbers come despite a 5% increase at its Old Navy locations. That increase was offset by the fact that Gap’s namesake stores saw their same-store sales drop 5% for the year after improving 3% during the previous year. Same-store sales at Banana Republic were flat for the year.
The big number: Gap Inc. also forecast declining profits in its outlook for the current fiscal year because of the strong U.S. dollar. Gap also blamed merchandise delivery delays from the recent labor slowdown at U.S. West Coast ports. Gap said exchange rates could lead to an earnings hit of about 16 cents per share this year while the ports’ labor problems could lower fiscal earnings by 13 cents per share.
Gap said it expects diluted fiscal earnings of as much as $2.80 per share for the 2015 fiscal year, which would represent a year-over-year decline.
What you might have missed: Despite a disappointing outlook for the current year, along with poor same-store sales for the namesake stores, Gap’s shares gained more than 2% in after-hours trading on the company’s announcement of a $1 billion share buyback program.
CEO Art Peck said in a statement that he and his team are “focused and ready for the year ahead,” while also promising to keep moving forward with the company’s growth strategy. Gap’s global growth continued in 2014, when the company opened 39 new stores in China, including 7 Old Navy stores and 32 of the company’s namesake stores. The company also said it expects to increase its stores’ square footage by 2.5% this year after it grew by 2.4% in the most recent year.
