Gap Inc. profit soars 25 percent in third quarter, Old Navy brand recovers

Gap profit climbs 25 percent in 3Q

CHICAGO — Shoppers spent more money at low-price Old Navy stores in the third quarter this year, helping Gap Inc.’s profit climb 25 percent compared with last year, the retailer said Thursday.

Sales in Old Navy stores open at least a year rose 10 percent after sliding for at two years. A year earlier, for example, the figure — a key performance indicator for retailers — slipped 18 percent.

Gap earned $307 million, or 44 cents per share, during the three-month period that ended Oct. 31. That compares with a profit of $246 million, or 35 cents per share, a year earlier.

In addition to its namesake stores and Old Navy, Gap owns Banana Republic, Piperlime and Athleta.

The clothing chain’s overall sales climbed 0.8 percent to $3.59 billion.

Analysts surveyed by Thomson Reuters expected Gap to earn 43 cents per share on sales of $3.59 billion.

Gap had seen sales dip as the recession forced shoppers to focus more on necessities and less on nonessentials like the company’s long-popular jeans.

Already slimming its inventory as part of a turnaround it initiated before the economic turmoil began, Gap responded to shoppers’ cutbacks by cutting even more in recent months and trimming the size and number of its stores.

It also retooled Old Navy to better cater to frugal moms and repositioned itself with new in-store marketing and more practical merchandise — and new advertising — to bring customers back to the chain.

Gap said Thursday that its board has authorized it to buy back $500 million in shares and that designer Stella McCartney will create a second line of children’s and baby clothing for GapKids and babyGap stores. The line is to launch in March.

Executives said Gap plans to continue its recent marketing and advertising blitz during the holidays.

“Looking ahead to the holiday season, we’re focused on gaining market share as we invest in marketing and present a strong value proposition to customers,” Chairman and CEO Glenn Murphy said in a statement.

Gap is based in San Francisco. It operates more than 3,100 stores around the globe.

Gap shares fell 44 cents, or 2 percent, to $21.86 in trading Thursday.

(This version CORRECTS SUBS graf 7 to recharacterize jeans as “long-popular.” SUBS graf 9 to add details on revent changes at Old Navy. SUBS graf 10 to correct spelling of McCartney.)