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Gap Shares Rise on Robust Oct Comps

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Shares of The Gap Inc. (GPS - Free Report) rose approximately 8% in the extended trading hours on the back of the company’s better-than-expected Oct 2013 comparable-store sales (comps) results and impressive earnings guidance for third-quarter fiscal 2013 which is well above the Zacks’ expectation.

Gap posted comps increase of 4% for Oct 2013, compared with an equivalent percentage increase for the 4 weeks ended Nov 3, 2012. Brand-wise, the company registered improved comps performance at every brand. Comps performance at Gap Global rose 5% compared with a 3% increase in the prior-year period. Comps at Banana Republic Global inched up 1%, as against a 5% rise recorded last year. Old Navy Global's comps increased 2% versus a 5% increase last year.

Net sales for the four-week period came at $1.29 billion, up from $1.22 billion during the four-week period ended Oct 27, 2012. The improved top-line results came primarily on the back of Gap’s strategy of bringing more brightly colored clothing, designer collaborations and livelier stores.

Net sales for the third quarter of fiscal 2013 came in at $3.98 billion, up from $3.86 billion reported in the year-ago comparable quarter. Comps inched up 1% in the quarter versus a 6% increase registered in third-quarter fiscal 2012.

Brand-wise, comps performances at Gap Global were up 1% compared with a 4% increase in the prior-year period. Comps at Banana Republic Global inched down 1% against a 5% rise recorded last year. Old Navy Global’s comps were flat versus a 9% increase last year.

Bolstered by better-than-expected October comps performance, Gap expects its earnings for the third quarter to come in the range of 70–71 cents per share, up 11%–13% from the year-ago figure. The earnings guidance is also significantly more than the Zacks Consensus Estimate of 66 cents per share. Gap will release its third-quarter results on Nov 21, 2013.

Among other store chain retailers, The Buckle Inc. (BKE - Free Report) , Limited Brands, Inc. and Zumiez Inc. posted comparable-store sales growth of 2.6%, 8% and 1.2%, respectively for the month of September.

In October, comparable-store sales results for most retailers increased owing to the cool weather conditions. Apart from this, the reopening of government offices boosted customer traffic to stores for buy-now and wear-now apparel.

Gap currently carries a Zacks Rank #3 (Hold) and is scheduled to release its November sales results on Dec 5, 2013.

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