Gap wows Street as Q4 profit surges 61%; plans call for expanding Athleta

San Francisco -- Gap Inc. offered further proof that its turnaround has taken hold, reporting a 61% increase in fourth quarter profit amid strong same-store sales growth across its banners. The results end a strong year for the chain, which also said it was increasing its dividend by 20%.

“Our results in 2012 were stellar in many ways, and I’m very pleased with how well our product resonated with customers,” said Glenn Murphy, chairman and CEO of Gap Inc. “We enter 2013 focused on leveraging our global brands to gain more market share and continuing to increase shareholder value.”

Gap plans to open about 35 Athleta stores in North American in fiscal 2013. But the bulk of its expansion will be focused on foreign markets as the company opens up to 20 Old Navy stores in Japan and 35 namesake stores in China.
In the quarter ended Feb.2, Gap earned a better-than-expected $351 million, compared with net income of $218 million. Revenue rose 10% to $4.73 billion in the period. (The company noted that fiscal year 2012 had 53 weeks versus 52 weeks in fiscal year 2011. As a result, the company’s results for the fourth quarter of fiscal year 2012 and for the fiscal year 2012 include the additional week, while comparable sales calculations exclude the 53rd week.)
Same-store sales in the quarter rose 5%. By division, Gap North America’s sales rose 4%, and Banana Republic North America’s sales rose 3%. Same-store sales at Old Navy were up 8%. The company’s international same-store sales were down 2%.  

Net sales for the 53 weeks ended February 2, 2013, were $15.7 billion compared with net sales of $14.5 billion for the 52 weeks ended January 28, 2012. Same-store rose 5%.

For the full year, Gap reported net income of $1.1 billion, compared with net income of $833 million for the 52 weeks ended January 28, 2012.

Gap ended the year with 3,407 stores in 47 countries, 3,095 of which are company-operated. Square footage of company-operated stores decreased 1% from the end of fiscal year 2011.

In fiscal 2013, the retailer expects to open about 160 company-operated stores, focused on Athleta, Gap China, Old Navy Japan, and global outlet stores. The company expects that it will close about 80 company-operated stores. The closures are weighted towards Gap North America, consistent with Gap’s previously stated strategy.


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