(By Salman) Gap Inc. (NYSE: GPS) is scheduled to release its fourth quarter 2009 earnings after the market close on Thursday, February 25, 2010. Analysts, on average, expect the company to report earnings of 49 cents per share on revenue of $4.22 billion. For the fourth quarter of the previous fiscal, the company reported earnings of 34 cents per share on revenue of $4.08 billion.
The Gap, Inc., through its subsidiaries, operates as a specialty retailing company. The company offers clothing, accessories, and personal care products for men, women, children, and babies under the Gap, Old Navy, Banana Republic, Piperlime, and Athleta brand names. At the end of third quarter, it operated approximately 3,143 store locations primarily in the United States, Canada, the United Kingdom, France, Ireland, and Japan.
In November, the San Francisco, California-based company posted net earnings of $307 million for the third quarter, up 25% from $246 million in the prior year quarter. Earnings per share rose to $0.44 from $0.35 in the year-earlier quarter. Revenue increased 1% to $3.59 billion from $3.56 billion in the same quarter last year. Analysts, on average, expected the company to report earnings of $0.44 per share on revenue of $3.58 billion. As a percentage of sales, gross margin increased by 380 basis points to 42.5%. Operating margin improved to 13.9% from 11.1% in the year-ago quarter.
The company expects to report earnings per share for the fourth quarter of fiscal year 2009 in the range of $0.49 to $0.51, which is an increase of about 50 percent compared with $0.34 for the fourth quarter last year. The expected fourth quarter earnings per share includes about a $0.01 benefit from the Visa / Mastercard settlement the company received in December 2009.
The company's fourth quarter comparable store sales increased 2% compared with a decrease of 14% in the fourth quarter of the prior year. For the thirteen weeks ended January 30, 2010, total company net sales were $4.24 billion, which is an increase of 4% as compared with net sales of $4.08 billion for the thirteen weeks ended January 31, 2009.
Thanks to robust holiday season and a rebound in consumer spending, the company has registered solid same store sales growth in past few months. Its comparable store sales for January 2010 were up 5% compared with a 23% decrease in January 2009. The company's comparable store sales for December 2009 increased 2% compared with a 14% decrease in December 2008. The company's comparable store sales for November 2009 were flat compared with a decrease of 10% for November 2008.
To lure shoppers, Gap increased its marketing spending this year, including returning its namesake label to television advertising in November after a two-year hiatus. Gap boosted marketing spending by $25 million in the third quarter and by $45 million in the fourth quarter. The upcoming quarterly results are likely to reflect the
The company said in November that it continues to expect opening about 50 stores and close about 100 stores for fiscal year 2009, including repositions. The company would open its first Gap store in China in 2010. The company also plans to expand the presence of its Outlet store internationally, and launch online businesses in Canada and the United Kingdom in 2010.
Among other developments during the quarter, Gap authorized a new $500 million share repurchase program.
The company's stock currently trades at a forward P/E (fye 31-Jan-11) of 11.77 and PEG (5 yr expected) of 1.15. In terms of stock performance, Gap shares have gained nearly 50% over the past year.
Disclosure: Author doesn't own any of the stocks discussed here.
