Gap’s profits drop 19% in Q2
San Francisco — Gap reported Thursday that profit for the quarter ended July 30 dropped 19% to $189 million, compared with $234 million in the year-ago period.
The retailer, which operates the Gap, Old Navy and Banana Republic banners, cited aggressive merchandise pricing reductions for the profit decline. Results beat analysts’ earnings expectations, but the declines still raised concerns about Gap’s performance in the upcoming fall and holiday shopping seasons.
Revenue rose 2% to $3.38 billion in the quarter, just missing Wall Street’s expected $3.39 billion in revenue. Same-store sales declined 2%. By division, Gap’s domestic business was down 3%, while Banana Republic posted a 2% decline. Old Navy’s domestic business was flat.
"We’ve been very clear internally and externally," Glenn Murphy, chairman and CEO, said during a conference call. "Our goal is to have moderate, steady growth in our domestic business and we’ve not achieved that."
Murphy, however, offered some reassurances to investors, saying “we have far greater opportunities than challenges ahead of us. Every brand, division, and geography is focused on what matters most — delivering consistent, great product and more effective marketing in order to drive higher levels of performance.
Murphy said the retailer’s top priorities are to increase marketing and turn around its women’s business.
Liberty acquires 17% stake in Barnes & Noble for $204 million
New York City — Barnes & Noble revealed late Thursday that media conglomerate Liberty Media has acquired a stake in the bookseller for $204 million.
The move, while celebrated by Barnes & Noble, is thought to be a disappointment for investors, who wanted the John C. Malone-controlled Liberty Media to buy Barnes & Noble outright. Liberty’s current investments include Starz Entertainment, home shopping channel QVC and the Atlanta Braves baseball team.
Last May, Liberty proffered $17 a share for 70% of the bookseller, but backed off after due diligence raised concerns about costs and the current economic climate.
The current deal gives Liberty a 16.6% stake in Barnes & Noble. Liberty also gets two new seats on Barnes & Noble’s board. It has nominated Gregory B. Maffei, its CEO, and Mark D. Carleton, a senior VP.
“This investment provides Barnes & Noble with capital to grow its business on terms that are attractive for both parties and allows us to play a meaningful role in shaping their success to generate returns for our shareholders and theirs,” Maffei said in a statement.
Barnes & Noble chairman Leonard S. Riggio added: “We could not have found a better strategic investor than Liberty Media. Their investment is a strong endorsement of our overall business, and the additional capital will further fuel the explosive growth of our digital strategy.”
Gap Inc. income down in a challenging quarter
SAN FRANCISCO — Gap Inc. reported that net sales for the second quarter of fiscal year 2011, which ended July 30, increased 2% to $3.39 billion compared with $3.32 billion for the second quarter last year. The company’s second quarter comparable sales, which include associated comparable online sales, were down 2% compared with a 1% increase in the second quarter last year. For the second quarter of fiscal year 2011, online sales positively impacted comparable sales for Gap Inc. by 2 percentage points.
Net income decreased 19% to $189 million compared with $234 million for the second quarter last year. Second quarter diluted earnings per share was 35 cents compared with 36 cents last year.
“Despite a difficult quarter, we still delivered a net sales improvement and I continue to believe we have far greater opportunities than challenges ahead of us,” said Glenn Murphy, chairman and CEO of Gap Inc. “Every brand, division, and geography is focused on what matters most – delivering consistent, great product and more effective marketing in order to drive higher levels of performance.”
During the second quarter of fiscal year 2011, the company opened 31 store locations and closed 28 store locations.
The company ended the second quarter of fiscal year 2011 with 3,248 store locations in 34 countries, including 195 franchise stores.