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The Gap Inc. (GPS), the largest U.S. clothing chain, reported disappointing sales results for the month of September 2010. The company’s comparable-store sales for the month slipped 2.0%, after recording a flat growth in August 2010 and a 1.0% increase in the month of July.
Gap, which operates the Old Navy and Banana Republic chains as well as Gap stores, hinted that comps declined 1% at Gap North America and 5% at Old Navy North America but remained flat at Banana Republic.
The international business recorded comparable-store sales growth of 3% versus a decline of 4% last year.

Year to date, comparable-store sales climbed 2.0% compared with a decline of 6.0% in the same period last year.    
After flat year-over year growth in August 2010, total sales for September grew marginally by 1.0% to $1.34 billion from $1.33 billion in the same month last year. Year to date, total sales rose by 3.0% to $9.12 billion from $8.82 billion in the same period last year.

Gap currently operates 3,100 stores in Canada, United Kingdom, France, Ireland and Japan. The company is also increasing its international exposure. Currently, it has franchisee agreements in Asia, Australia, Europe, Latin America and the Middle East.
The turnaround story in the U.S. has helped the company to build a strong position in order to expand overseas and also in the online space.
The San Francisco, California-based retailer expects earnings for fiscal 2010 in the range of $1.77–$1.82. The Zacks Consensus Estimate of $1.82 lies at the high end of the guidance range.
Gap’s shares maintain a Zacks #3 Rank, which translates into a short-term Hold recommendation. Our long-term recommendation for the stock remains Neutral.

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