FINANCE

Gap profit drops 40% in Q4, on track to open 10 net new stores in 2012

BY Katherine Boccaccio

San Francisco — Gap Inc. reported Thursday that net income for the fourth quarter plummeted 40% on higher costs and aggressive discounting during the holiday selling season.

Net income for the quarter ended Jan. 28 was $218 million, compared with $365 million a year earlier. Sales dipped to $4.28 billion in the quarter, from $4.36 billion, matching Wall Street estimates.

Same-store sales fell 4%. By division, same-store sales fell 3% at Gap North America, and 6% at Old Navy. Banana Republic’s domestic same-store sales were unchanged compared with the year-ago period. The international division had an 8% decline.

For the full year, profit declined 17% to $833 million. Sales dipped 1% to $14.5 billion for the year, and same-store sales were down 4% compared with a 2% increase last year.

“In spite of 2011 earnings being below last year, we’re pleased with the progress we made against our long-term strategic plan, including growing our online business and expanding internationally,” said Glenn Murphy, chairman and CEO of Gap Inc. “There’s no doubt that improving our performance, especially in our base businesses, is the top priority in 2012, and we’re confident this is the right time to invest wisely to win back customers.”

In fiscal year 2012, the company said it expects to open about 125 company-operated stores, net of repositions, 55 of which are international. About 115 company-owned stores are slated for closure.

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More momentum expected at Sam’s Club

BY CSA STAFF

A body in motion tends to stay in motion and that appears to be the case with Sam’s Club where a strong fourth-quarter performance is expected to continue in 2012 under the leadership of new president and CEO Rosalind Brewer.

The former Walmart store operations executive took the helm from outgoing Sam’s president and CEO Brian Cornell three weeks ago and is looking to build on the momentum he initiated and was evident in fourth quarter results reported earlier this week.

Sam’s same-store sales increased 6.8%, and total sales increased by the same amount to $14 billion from $13.1 billion if fuel sales are included in the mix. Excluding fuel, which is how Sam’s like to analyze things because volatile gas prices can distort comparisons, comps increased 5.4% and total sales increased by 5.4% to $12.6 billion. Operating profits grew at a faster pace, advancing 7.6% to $524 million from $487 million.

Brewer said Sam’s was very pleased with the top line performance and reported strength across all three of its operating division with increases in member traffic and average transaction size.

“Our entire organization is highly motivated to continue this great momentum,” Brewer said during a pre-recorded call. “Member experience survey results are at an all-time high. Our merchandising team is doing a fantastic job of finding items that members want, at a great value, and the club operators are doing a great job of getting those items in front of the Sam’s Club members.”

Looking forward, Brewer said Sam’s expects first quarter comps in the range of 3% to 5% and new clubs and expansions will also contribute to sales with plans on track for 10 to 15 new units and a higher proportion of those being new clubs as opposed to relocations or expansions. Nine new clubs are expected to open this year compared with three last year.

“We have a great opportunity to engage new members in key markets. I’m really looking forward to seeing how much more the Sam’s Club team accomplishes this year,” Brewer said.

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Walmart wants to be the Amazon of China

BY CSA STAFF

News this week that Walmart acquired a majority stake in one of China’s fastest growing e-commerce companies positions Walmart to become a dominant multichannel player in China far faster than it ever would have on its own.

Walmart is no stranger to China, but after 15 years it still has only 370 stores, and that’s after opening 42 units this year in an unprecedented burst of expansion. Walmart’s been in China long enough and understands where retail is heading well enough to know that the faster path to growth in a country with more than one billion people is likely to look a lot different than it did in the United States. Accordingly, Walmart upped its ownership stake in Yihaodian to 51% less than a year after making its initial investment. That’s good news for Yihaodian, which gains access to increased capital to grow and its good for Walmart because it just shortened its e-commerce learning curve.

“This investment further enables Walmart to deliver a superb customer experience to Chinese consumers that are already connected to the world through smart phones and social media,” said Neil Ashe, Walmart’s relatively new president and CEO of global e-commerce. “We are on track to create the next generation of e-commerce, offering the latest in online innovations to give our customers a unique shopping experience.”

Ashe said Walmart’s additional investment in Yihaodian, “Demonstrates that we are committed to investing in China in a key growth industry and developing all that goes with it: logistics, infrastructure, innovative talent and new technologies that will help China meet its development goals.”

Yihaodian is an early stage company that was founded in July 2008, and in less than four years has achieved a significant position in online grocery sales and such categories as baby, consumer electronics and apparel. From its distribution facilities in such major population centers as Shanghai, Beijing, Guangzhou, Wuhan and Chengdu.

Yihaodian provides more than 180,000 products with same day and next day delivery of products. The number of items provided today is more than double the 75,000 products offered when Walmart made its initial investment in May 2011 and new facilities in Wuhan and Chengdu have also been added during that time.

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