Gap (GPS) shares are modestly lower this morning despite reporting upside second quarter earnings yesterday afternoon. The company reported adjusted EPS of $0.58 versus $0.60 last year with revenues in-line with expectations at $3.8 billion (-1%). Comp sales were up 1% vs. a 2% decrease last year aided by a 5% comp increase in its Old Navy brand.
GPS also provided investors with guidance, increasing EPS expectations to $2.02-2.10 (from $1.95-2.05) for the year and reiterating the expectation of same-store being flat to up slightly.
While comp sales have improved year/year, both the Gap and Banana Republic brands continue to see decreases overall. Gap brand reported a 4% drop in comp store sales vs. a 3% decline in the prior year. Banana Republic reported a 5% drop vs. on top of a 9% decline last year. "With a third consecutive quarter of comp sales growth, we are seeing our investments in product, customer experience, and brand equity begin to pay off," said Art Peck, Chief Executive Officer.
Despite reporting a better than expected quarter, Gap is still struggling with lower traffic like most retailers. All things considered, this was a respectable quarter in a difficult environment. Not many retailers have been able to raise guidance this Summer.
GPS has been trading in a range between $22 and $26 all year. The stock was up as much as 10% in the after-hours but has since given up all of those gains and is now near the low end of its range as retail stocks sell-off (XRT -0.6%) following a disastrous quarter from Foot Locker (FL -24%).