SAN FRANCISCO — Gap Inc. reported Thursday that profit for the third quarter dropped 36% to $193 million, compared with $303 million a year earlier, as the retailer continued a deep discounting trend and encountered rising production costs. Still, results beat analysts’ expectations.
Overall revenue slipped 1.8% to $3.58 billion, missing Wall Street’s expected $3.59 billion in revenue. Same-store sales overall dropped 5%, with Gap North America stores falling 6%, but just a 1% dip for Banana Republic stores in North America and 4% down for Old Navy. Same-store sales at the Gap banner have been dropped for the last six years in North America.
In October, Gap announced it would close 189 U.S. locations by the end of 2013, while tripling its China presence. Overall, the company intends to cut its square footage in the U.S. by 10% by 2013, compared with 2007, and to double the share of its revenue that comes from outside of the U.S. to 30%.
"Across our brands, we're intensely focused on improving our current sales trend, including making necessary product and marketing adjustments, with a view toward building momentum as we head into 2012," Glenn Murphy, Gap Inc.'s CEO and chairman, said in a statement. "We're ready to compete aggressively this holiday."
The company’s strategy is expected to result in a total of about 950 Gap stores in North America by the end of fiscal year 2013, comprised of about 700 specialty and about 250 outlet stores. Third quarter year to date in North America, the company closed 20 stores, on a net basis.
The company continues to expect fiscal year 2011 company-operated store openings to be about 125. However, it said it now expects about 150 company-operated store closures compared with previous guidance of about 125.