Gap Reports Second Quarterly Loss

Long-slumping retailer Gap Inc. said Tuesday it ended the worst year in its history with its second consecutive quarterly loss, and it announced key management changes at its core Gap brand, which has fared the worst.

The San Francisco-based company lost $34.2 million, or 4 cents per share, in the 13 weeks ended Feb. 2, compared with a profit of $271.8 million, or 31 cents per share, in the same period last year.

The loss matched the consensus estimate of analysts polled by Thomson Financial/First Call.

Gap's fourth-quarter sales totaled $4.09 billion, an 11 percent decline from $4.58 billion in the prior year. Sales at stores open at least a year, known as same-store sales, fell even more dramatically, plunging by 16 percent. Same-store sales are considered the best indicator of a retailer's health.

The bad news appears to be continuing into this month. Company management said that through Monday, the retailer's February same-stores sales dropped 17 percent, hurt by a shortage of key items and fashion misses. The company said it expects its Banana Republic and Old Navy units to beat projections, while Gap's results are projected to "fall short," according to Heidi Kunz, chief financial officer. The results mean Gap's same-store sales will fall for the 22nd consecutive month.

Although the fourth quarter didn't turn out as badly as analysts had feared heading into the holiday shopping season, the showing represented a harsh comedown for the once-trendy Gap, which started with one store in 1969. Despite the recession, virtually all major retailers except Gap managed to turn a profit during the year's final quarter.

The Gap also lost money in the third quarter despite a cost-cutting program, which included the first mass layoffs in the company's history.

"I wish I could tell you all our problems are behind us," Gap CEO Millard Drexler said in a conference call. "While we still have a lot to do, we have made significant strides."

Drexler has taken over day-to-day management of the Gap's flagship chain, which he described as the company's biggest challenge. The management shakeup, announced Tuesday, includes the appointment of Marka Hansen, 48, who assumes the new role of executive vice president for Gap Adult. A 15-year-veteran at Gap, Hansen will oversee all general merchandising management, planning and production for that division.

The retailer also named Tara Poseley, 36, senior vice president for GapKids and babyGap, succeeding Robin Rice. Poseley had been vice president of Gap Merchandising Systems.

Gap also split its adult merchandising functions into men's and women's divisions. Nancy Green, previously responsible for Gap Adult, will now oversee women's merchandising. Tracey Gardner, previously head of men's merchandising for Banana Republic, will oversee men's merchandising for Gap. Both report to Hansen.

In addition, Barbara Wambach, 41, has joined the company as executive vice president of GapBody. Wambach was most recently chief executive and President of e-Luxury.

In anticipation of Tuesday's report, announced after the regular markets closed, Gap's shares gained 64 cents to close at $13.55 on the New York Stock Exchange. The shares dropped $1.03, or close to 8 percent, reaching $12.52 per share, in after-hours trading.

For the year, Gap lost $7.8 million, or 1 cent per share, on sales of $13.8 billion. In the previous year, Gap earned $877.5 million, or $1 per share, on sales of $13.7 billion.