Gap Inc., the largest U.S. specialty apparel retailer, on Thursday reported a slight decline in quarterly profit, meeting lowered forecasts, after summer clearance sales drew surprisingly small crowds.
The San Francisco-based retailer also said operating costs would rise more than expected this year, and it would close more stores than originally planned.
Gap, which owns its namesake casual clothing chain as well as Banana Republic and the lower-priced Old Navy stores, reported slack sales in June and July as fewer people shopped its summer clearance events.
Many U.S. retailers reported slumping sales in June, which analysts blamed on soaring gasoline prices and unusually cool, wet weather. But Gap's sales remained weak in July, raising questions as to whether a two-year turnaround remained on track.
Analysts were awaiting word on back-to-school and fall season demand on a conference call with Gap management, scheduled for Thursday afternoon.
Earlier on Thursday, rival Limited Brands Inc. posted a 45 percent jump in quarterly profit but said clothing sales were off to a slow start in August, and its shares fell 1.2 percent to close at $20 on the New York Stock Exchange.
Gap said it earned $194 million, or 21 cents per share, in the fiscal second quarter ended July 31, compared with $209 million, or 22 cents per share, in the same period a year earlier.
Analysts, on average, expected earnings of 21 cents per share, according to Reuters Estimates. Gap warned on August 5 that earnings would likely be between 19 cents and 21 cents per share. At the time, analysts had expected 28 cents.
Results in the latest period include a charge of 4 cents per share for early debt retirement. Gap said the early debt retirement expense would increase full-year operating costs, which it now expects to be up about 11 percent instead of the 9 percent to 10 percent increase it originally planned.
The retailer also said it plans to close about 150 stores this year -- 15 more than previously expected -- and open about 125 locations. The store openings will be weighted toward Gap's lower-priced Old Navy chain, while the store closings will include more of its namesake Gap stores.