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Gap's Sales, Earnings Decline

November 16, 2001|Bloomberg News

Gap Inc. had a fiscal third-quarter loss, its first quarterly loss in more than a decade, as the largest U.S. clothing chain slashed prices to get rid of slow-selling fall clothing.

Gap, owner of Gap, Old Navy and Banana Republic stores, had a loss of $178.8 million, or 21 cents a share, contrasted with net income of $186.3 million, or 21 cents, a year earlier. Sales in the period ended Nov. 3 fell 2.4% to $3.33 billion from $3.41 billion, the company said.

Demand declined at all divisions, leading to a 17% drop in same-store sales. Gap had to cut prices after it stocked too many fall items in unappealing colors such as off-white and camel, and styles such as ultra-mini skirts ignored older customers, analysts said. The company's holiday offerings also aren't inspiring, they said.

"We're waiting to see how confident they are about their holiday offerings, whether it's better than the fall merchandise, which was dismal," said David Katz, chief investment officer at Matrix Asset Advisors Inc., which holds Gap shares.

Gap didn't provide an outlook for the fourth quarter. The retailer's "priorities are controlling costs, strengthening margins and getting the product right," Chief Executive Mickey Drexler said in a statement.

The cost of goods sold and occupancy expenses rose to 71.5% of sales from 63.2%, the company said.

Excluding a tax expense of $131 million, the loss was $48 million, or 6 cents, Gap said. On that basis, the retailer was forecast to have a 7-cent loss, the average forecast of analysts polled by Thomson Financial/First Call.

Shares of San Francisco-based Gap fell 53 cents to close at $14.55 on the New York Stock Exchange. The stock has lost 43% this year.

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