Gap records 29% Q2 profit

Confidence goes up about a turn around
 Gap records 29 Q2 profit

Apparel makers Gap, which owns brands like Banana Republic and Old Navy, has reported a 29% jump in Q2 profits. Though still falling behind analysts’ expectations, investors are now more confident that the brand is making a comeback.

Net income stood at $243 million, up from $ 189 million a year ago during the same period.  Sales increased by 5.5%, at $3.58 billion. Following two successful quarters, the company has heightened its 2012 forecast.

Gap’s success has come on the back of good sales in the USA outlets, while sales outside USA and Canada fell by 4%. Overall, net sales abroad increased by 7%. During this quarter, Gap had opened its first store in Asia in Tokyo.

Glenn Murphy, Gap’s chairman and CEO said during a conference call,"There were a lot of bright spots inside the business that we feel good about," However, he also cautioned against complacency, since store traffic was down in Q2.

Gap’s performance has cheered up the investors. Its brands had been losing customers to peppier, funkier rivals who appealed more to the youth and dominated online sales. Gap had vowed for a turnaround, and had meticulously revamped their products and amped up store operations. When results were reported for the last quarter, the company had put up a much better show, but analysts and investors decided to wait and watch to check whether that was a one-off show.

With this quarter’s results being impressive, the company is now more confident about its comeback. Earlier, Gap had been synonymous with youth fashion, but the customers were wooed away by its rivals. Gap has been tying up with designers like Narciso Rodriguez and Diane Von Furstenberg for designing and management of its brands. The company has also seen several top-level hires, and gone for a planned expansion. 

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