Gap profitmisses forecasts on sales slump at namesake brand

NEWYORK» Gap Inc. reported a first-quarter profit that missedWall Street expectations, hurt by a deeper slump in demand for its namesake label. Its shares fell 7 percent in extended trading.

The San Francisco-based chain said that overall sales at established stores rose 1 percent, dragged down by a 4 percent drop at Gap. Old Navy and Banana Republic both saw sales rise 3 percent.

The results underscore how the Gap brand itself is failing to connect with shoppers, even as the company works to overhaul the business. The chain has been shifting its focus to its growing Old Navy and Athleta stores and away from the Gap and Banana Republic brands. Lowerpriced Old Navy, in particular, has been a bright spot.

Gap faces the same problems as many other fashion chains as consumers shift their spending away from clothing and more toward experiences. But Gap, in particular, has struggled to differentiate itself from the sea of clothing options fromcompetitors.

The company earned $164 million, or 42 cents per share, in the quarter ended May 5. That compares with $143 million, or 36 cents per share, in the year-ago period. The results did not meet Wall Street expectations. The average estimate of 12 analysts surveyed by Zacks Investment Research was for earnings of 45 cents per share.

Gap posted revenue of $3.78 billion. Nine analysts surveyed by Zacks expected $3.61 billion.

The clothing chain still expects full-year earnings of $2.55 to $2.70 per share. Analysts expect $2.61 per share for the year, according to FactSet estimates.

Its shares were down $2.29 to $30.66 in after-market trading. In regular trading before the financial results were released, they had gained 3 percent to $32.95.