Gap Chases Turnaround

Gap executives talked about the store expansion and closing plans Thursday during a conference call with financial analysts in which the execs discussed the company's financial results for the first quarter ended April 29. Earnings slipped to $242 million versus $291 million in the first quarter last year, down three cents to 28 cents on a per-share basis, on sales that dipped 5% to $3.44 billion and comparable store sales that decreased 9%.

Gap is nonetheless confident of turning around its financial performance, according to president and CEO Paul Pressler, who said the company expects to see better financial results in the second quarter in light of "strategies under way to turn around our business performance." Commented Pressler, "In our fourth-quarter conference call, we said that the first half of the year would be challenging, and our first-quarter results were in line with our expectations."

Through April 29, Gap opened 38 locations and closed 21, with net square footage for the first quarter increasing 3% compared with the same period last year. For fiscal 2006, the company still expects to open about 175 stores, weighted toward its Old Navy brand, and to close about 135 locations, weighted toward the Gap brand. Net square footage is still expected to increase between 1% and 2% for fiscal 2006.

In addition to the openings and closings that are consolidating its long-established brands, Gap is looking to its new Forth & Towne for some of its growth. Pressler said in the conference call that the company plans to "open about 10 new stores this fall in Atlanta, Houston, Los Angeles, San Francisco and Seattle" under the Forth & Towne brand.

Pressler added that Gap continues to expand its brands internationally, and that it is "confident in the strategic direction of each of our brands." Among the strategic initiatives Pressler cited were "improvements in our products and in-store experience" at virtually all of the brands.