Gap Q2 earnings soar 17 percent, announces plans to enter India

REPORT_ Gap reported that its second quarter fiscal year 2014 earnings per share

increased 17 percent over last year to 0.75 dollars on a diluted basis. The company increased net sales by 3 percent for the quarter to 3.98 billion dollars. Meanwhile, the company also announced its plans of entering the Indian market in 2015, through franchise agreement with Arvind Lifestyle Brand.

“Building on last year’s strong performance, we are pleased to have grown our sales 3 percent and delivered solid improvement in earnings per share,” said Glenn Murphy, Chairman and Chief Executive Officer of Gap, adding, “We remain focused on our strategic initiatives, as we turn our focus toward delivering a strong second half.”

Apart from its plans of entering India, Gap brand continued to grow its store base in the greater China region with five new stores during the quarter, and the brand is on track to finish fiscal year 2014 with approximately 110 Gap stores across mainland China, Hong Kong and Taiwan.

Old Navy increased comparable sales 4 percent during the second quarter of fiscal year 2014, on top of last year’s positive 6 percent comparable sales. The brand continued its global expansion strategy during the quarter, opening three additional company-operated stores in mainland China, following its debut in that market earlier this year. In addition, Old Navy is on track to open about 20 stores in Japan this year for a total of about 40 stores by year-end. Following the brand’s launch of franchise-operated stores in the first quarter of fiscal year 2014, Old Navy expects to open a total of five franchise-operated stores in the Philippines during 2014.

Athleta opened 8 new stores during the second quarter for a total of 79 stores, and the brand remains on track to end fiscal year 2014 with about 100 American stores. As the company continued to enhance its digital capabilities for customers, online net sales increased 11 percent to 515 million dollars, on top of last year’s 27 percent increase.

The company’s second quarter comparable sales were flat compared with a 5 percent increase in the second quarter of last year. Comparable sales at Gap Global were negative 5 percent versus positive 6 percent last year, at Banana Republic Global, flat versus negative 1 percent last year and Old Navy Global, positive 4 percent versus positive 6 percent last year.

The company updated its guidance for full-year 2014 diluted earnings per share to be in the range of 2.95 dollars to 3 dollars, to reflect the 0.05 dollars related to the gain on asset sale. For fiscal year 2014, the company continues to expect capital spending to be approximately 750 million dollars in support of its outlined strategies.

The company ended the second quarter of fiscal year 2014 with 3,594 store locations in 48 countries. During the second quarter of fiscal year 2014, the company opened 47 and closed 26 company-operated stores. In fiscal year 2014, the company continues to expect to open about 185 company-operated stores, focused on China, Old Navy in Japan, Athleta, and global outlet stores. In addition, the company plans to close about 70 company-operated stores, which are weighted towards Gap North America. The company will report August sales on September 4, 2014.