Gap Profit Rises on Cost Cutting
Los Angeles Gap Inc. closed out its third consecutive year of declining sales with a 21% increase in its fourth-quarter profit, reflecting the gains from cost cutting triggered by the worst slump in the clothing retailer’s history.
Gap earned $265 million during the three months ended Feb. 2, compared with net income of $219 million in the same period a year earlier.
Revenue totaled $4.68 billion compared to $4.92 billion in the previous year. Same-store sales fell 3%. It marked the 14th consecutive quarterly decline in Gap’s comparable-store sales, the company’s deepest funk since co-founders Donald and Doris Fisher opened Gap’s first store in 1969.
After releasing the results Thursday, Gap’s management said the San Francisco-based company will try to weather “volatile” economic conditions by becoming even more frugal in 2008.
The more austere approach will include opening fewer stores and shrinking the size of many existing outlets. Gap also may trim its advertising budget, just as it did during the second half of 2007, while its fashion experts try to design clothes that will lure consumers back to its stores.
“While we are pleased with our progress in 2007, we recognize there is much work to be done,” Sabrina Simmons, Gap’s CFO told analysts during a conference call.
Management plans to save money this year by opening just 100 stores worldwide, down from 214 last year. Sixty-five stores are scheduled to open in North America, and management indicated the number would have been even lower if not for commitments made more than a year ago. Gap has budgeted $500 million for capital expenditures this year, a 27% decrease from $682 million last year.
Kohl’s sees 4Q net income fall
MENOMONEE FALLS, Wis. Kohl’s today reported that net income for the quarter ended Feb. 2 was $411.7 million, or $1.31 per diluted share, compared with $484.6 million, or $1.48 per diluted share, a year ago. Net sales were $5.5 billion, an increase of 0.7% for the quarter. Comparable-store sales for the quarter decreased 4%.
The company reported that net income for the fiscal year ended Feb. 2, 2008, net income was $1.1 billion, or $3.39 per diluted share, compared with $1.1 billion or $3.31 per diluted share, a year ago. Net sales were $16.5 billion for the year, an increase of 5.6% over $15.6 billion a year ago. On a comparable 52-week basis, comparable-store sales decreased 0.8%.
Larry Montgomery, Kohl’s chairman and ceo, said, “2007 proved to be a difficult year for most retailers, and Kohl’s was no exception. Despite a challenging year which saw deep discounts across the industry, our gross margin increased over the prior year as a result of improved inventory management and increased penetration from our private and exclusive brands. Additionally, we achieved record sales for our sixteenth consecutive year as a public company and increased our diluted earnings per share over last year.”
Based on assumptions of a total sales increase of 5% to 8% and a comparable sales change of 0% to negative 3%, the company expects earnings per diluted share of $3.15 to $3.50 for the year. For the first fiscal quarter, the company expects earnings per diluted share of 50 cents to 54 cents.
Spring to head Bloomingdale’s
CINCINNATI Tony Spring has been named president of Macy’s Inc.’s Bloomingdale’s division, effective immediately. Since 2005, Spring has served as Bloomingdale’s senior evp and director of stores, with additional responsibility for Bloomingdale’s shopping services and creative services. In his new role, Spring will be responsible for the division’s stores, marketing, creative services, finance, operations and restaurants.
“As Bloomingdale’s grows its presence nationally, the addition of an operating principal will provide the division with additional management resources and support,” said Macy’s Inc. vice chair Susan Kronick, to whom Bloomingdale’s reports. “Tony Spring is an exceptional executive who has proven himself to be resourceful and creative in supporting growth of the Bloomingdale’s brand. He and Mike Gould will represent a powerful principal team as Bloomingdale’s continues to build its market presence serving the needs of fashion-forward, upscale customers coast to coast.”
Spring began his career at Bloomingdale’s as an executive trainee in the White Plains store and went on to hold various buying positions in the home furnishing area. In 1995, Spring was promoted to senior vp for home furnishings, and two years later was named senior vp for marketing. In 1998, he was promoted to evp for marketing and in 2003 added bloomingdales.com, Bloomingdale’s by Mail and restaurants to his responsibilities. In 2004, Spring was named senior evp responsible for marketing, Bloomingdale’s Direct and restaurants before becoming director of stores in 2005.