Gap (GPS 33.78, +2.08) has jumped 6.6% in pre-market after delivering its quarterly report, which exceeded expectations, included upbeat guidance, and called for a dividend hike.
The apparel retailer reported above-consensus fourth quarter earnings of $0.61 per share on a 7.9% year-over-year increase in revenue to $4.78 billion, which was also ahead of estimates. Going forward, the company expects that earnings for fiscal year 2019 will be between $2.55 per share and $2.70 per share, which is ahead of market expectations.
During the fourth quarter, Gap's comparable sales grew 5.0% after increasing 2.0% one year ago. Old Navy Global led the way with a 9.0% increase in comparable sales (+5.0% one year ago) while Banana Republic Global comparable sales increased 1.0% year-over-year (-3.0% one year ago). Gap Global comparable sales were unchanged this year after no change one year ago.
Operating margin was unchanged at 8.9%. The company's inventory at the end of the quarter was up 9.0% year-over-year. This was mostly due to the timing of receipts and an extra week of sales.
Gap plans to open 25 company-operated stores in fiscal year 2018. Openings will be focused on Athleta and Old Navy locations while some Gap and Banana Republic locations will be closed. Capital spending is expected to reach $800 million during fiscal 2018.
In addition to reporting earnings, Gap announced that its quarterly dividend has been increased to $0.2425 per share from $0.23 per share.