The U.S. apparel giant, Gap Inc. (GPS, Financial), reported its preliminary earnings last Thursday and the report card was better than what was expected from the third quarter by analysts, and which send the share price marching upwards in the extended trading session. As the company released the expected numbers that created a sense of relief among investors worried on the movement of the stock, let’s dive in and find out what actually happened during the quarter as projected from the company corner.
The preliminary report sheet
Gap Inc. that operates Gap, Banana Republic and Old Navy stated after the markets closed that it expects to earn $0.78 a share to $0.79 a share for the quarter than ran through October, while analysts have forecasted the earnings to be around $0.71 a share for the quarter.
Net sales for the third quarter of fiscal year 2014 stood at $3.97 billion, compared with $3.98 billion for the third quarter last year. However, the company expects both gross margin and operating expenses to be better compared to the guidance given with the company’s September 2014 sales announcement. In fact the company expect to gain from lower effective tax rate in the third quarter of the fiscal year, when compared with that of the previous year primarily due to the recognition of certain foreign tax credits.
But the October sales report has been terribly bad for the retailer that’s expecting to report better numbers this month for the quarter. Let’s peek and find out what are the sales figures portrayed by the company enlarge.
The worse than thought of October sales
Gap Inc.’s comparable sales for October of the fiscal year was down 3% versus a 4% increase seen in the year-ago. Comparable sales of global brands have also been disclosed by the company and the numbers are not appealing to the investors. Gap Global posted sales that went down 7%, compared to the 5% positivity seen in the third quarter of last year. Banana Republic and Old Navy posted sales that were negative at 2% and flat respectively, compared to 1% and 2% improvement seen a year ago for the two global brands.
The company’s chairman and CEO, Glenn Murphy, stated – “While we were disappointed in our October sales results, particularly at Gap, we look forward to presenting our improved product collections for the holiday season across all our brands.”
The management remains optimistic that the results for the quarter will overshadow the slump in sales seen in the month of October and this has led to a positive reaction in the stock movement as seen in the extended trading session. Even analysts sound upbeat on the company’s future and many believe that the retailer will “continue to outperform longer term.”
To conclude
More information in the financial performance of Gap Inc. will be clear on November 20 when the retailer will be announcing the actual third quarter results and maybe the stock movement after the announcement will be an important event to watch for. Till then, as conveyed by the top brass it seems like Gap is desperate to keep its numbers growing at a steady pace to keep investors contended. Let’s wait for the actual results to be out to take the final call on Gap as an investment option for the stockholders.
