Earnings: Gap |

Gap Reports Lower Earnings

SAN FRANCISCO - (AP) - Gap Inc. (GPS) shares fell more than 3 percent Friday after the retailer reported lower earnings and sales for the fourth quarter and offered a discouraging forecast for this year.

CEO Paul Pressler, hired to lead a turnaround, finds himself on the hot seat as he tries to appease investors disillusioned with the dismal earnings and outlook that the company released after the stock market closed Thursday.

Gap shares fell 59 cents, or 3.1 percent, to $18.55 in afternoon trading Friday on the New York Stock Exchange.

Wall Street shrugged off the news that the company would raise its annual dividend by 78 percent to 32 cents per share.

In its latest quarter ended Jan. 28, San Francisco-based Gap earned $337 million, or 39 cents per share. That compared with net income of $378 million, or 40 cents per share, in the previous year.

Sales totaled $4.8 billion, a 2 percent decline from $4.9 billion in the previous year.

The earnings matched the average estimate among analysts polled by Thomson Financial.

More importantly to investors, Gap said its customer traffic continued to sag badly in February, prompting management to warn that the company's earnings this year will miss analyst targets.

The company forecast earnings of $1.23 to $1.27 per share, below the average analyst estimate of $1.34 per share, according to Thomson Financial.

It marked the latest in a string of disappointments.

Just three months ago, Pressler warned Gap's sales would falter in the pivotal holiday shopping season, reflecting the company's ongoing struggle to keep up with ever-changing fashion tastes.

Gap's sales at stores open for at least a year provide an even more telling indication of how far the company has fallen. Those comparable store sales have fallen in six consecutive quarters, including a 6 percent decline in the most recent three-month period.

The downturn has raised more doubts about one of the nation's best known and largest retailers. Besides it flagship brand, Gap also owns the Old Navy and Banana Republic chains.

The recent questions have echoed some of the concerns raised during another persistent sales slump that culminated in the September 2002 ouster of Millard "Mickey" Drexler and Pressler's arrival from a top job at Walt Disney Co.

Pressler produced steady sales and earnings gains during his first 18 months on the job, but Gap's recent troubles have left some analysts wondering how much of his early success stemmed from cost cutting and fashion changes engineered Drexler.

In a Thursday conference call, Pressler reiterated his earlier predictions that Gap will design more appealing clothes, although he acknowledged it might take some time to lure back shoppers alienated by the company's recent missteps.

"We recognize our success depends on creating great products and we are aggressively taking action to improve," Pressler told analysts during a conference call.

For all of fiscal 2005, Gap earned $1.11 billion on sales of $16 billion. That compared with a fiscal 2004 profit of $1.15 billion on sales of $16.3 billion.

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