The Gap Inc. (GPS), on Feb 9, released impressive key sales numbers for the fourth quarter, while the data for January was slightly disappointing. The company reported fourth-quarter fiscal 2014 (13-weeks ended Jan 31, 2015) net sales of $4.71 billion, a 3% jump from $4.58 billion posted in fourth-quarter fiscal 2013. On a currency neutral basis, the company’s sales rose 5% in the quarter.
Comparable-store sales (comps) for the quarter surged 2% compared with a 1% increase in the prior-year quarter as the company continued to gain from strong performance at Old Navy, which reported double-digit comps.
Brand-wise, fourth-quarter comps at Old Navy Global rose 11% compared with flat comps last year. Banana Republic Global’s comps increased 1% in contrast to a 3% decline reported in fourth-quarter 2013. However, comps at Gap Global were down 6% as against a 1% increase recorded in the prior-year quarter.
For January (four weeks ended Jan 31, 2015), Gap’s net sales fell 1.2% to $888 million from $899 million in the prior-year period. Simultaneously, comps for the month slipped 3% versus a 1% increase last year.
January comps at Old Navy Global were up 3% compared with a 4% increase in the prior-year period. Banana Republic Global’s comps rose 2% versus a 10% fall reported last year. However, comps at Gap Global were down 9% as against a 1% increase recorded in Jan 2014.
The encouraging fourth-quarter sales results and projections for lower-than-expected tax rate, led the company to raise its earnings forecast for fiscal 2014. It now expects earnings per share for fiscal 2014 in the range of $2.86–$2.87 compared with $2.73–$2.78 projected earlier. For the fourth-quarter, the company anticipates earnings per share of $0.73–$0.74.
Further, Gap now expects fiscal 2014 effective tax rate to be approximately 37.3%, down from the previous guidance of 38%. The lowered forecast primarily takes into account retroactive extension of certain tax benefits in Dec 2014.
While Gap was on the back foot with regard to its January comps, retailers in general benefited during the month from increasing consumer confidence and improving job prospects. Retailers such as Zumiez, Inc. (ZUMZ), Rite Aid Corp. (RAD) and L Brands Inc. (LB) saw their comps rise 12.3%, 4.8% and 7%, respectively, during the month.
Gap, which is scheduled to release its fourth-quarter earnings results on Feb 26, 2014, currently carries a Zacks Rank #3 (Hold). The company is slated to report February sales results on Mar 5, 2015.
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