Gap Posts Surprise Sales Increase for December

Late Thursday, Gap posted a surprise increase in its comparable sales for December and announced that it expected profit in 2016 to be higher than its forecasted higher end, a sharp contrast to the weak sales during the holiday shopping season from operators of department stores and some retailers of apparel.

Shares of the parent company, which was helped from strong demand for its Old Navy and Gap brands, were up over 8% in Thursday trading after the bell.

The company has revamped the Banana Republic and Gap brands, as it looks to replicate its success in its Old Navy apparel.

Comparable sales for its signature brand Gap were up 1% during December, in comparison with a decline of 2% the previous year.

The Old Navy brand had an increase in sales of 12% in comparison to a drop of 7% for the same period in 2015. The comparable sales of the company rose overall by 4% during December, while Wall Street was expecting a decline of 0.7%.

One analyst on Wall Street said the in September the comparable sales figure was down 10%, in October down 7% and in November down 3% and that is showing signs of improvement.

Gap and other chains that sell traditional apparel have struggled with increasing popularity of retailers online and the fast-fashion chains like Forever 21, Zara and H&M, which have become known for having trendier clothes at inexpensive prices.

Gap, which is shutting some stores and lowering costs of overhead, said it was expecting its 2016 full year adjusted profit be slightly higher than its previously forecasted high end of $1.92 a share.

Department stores chains Kohl’s and Macy’s both lowered their profit forecasts for 2016 on Wednesday, following holiday shopping season sales that dropped more than was expected.

American Eagle Outfitters, which announced that comparable sales for the fourth quarter to date are flat, said Thursday that its holiday shopping season has been choppy as well as highly promotional.

Gap CFO Sabrina Simmons announced that the company was pleased with its improved momentum seen during the holiday shopping season that had been primarily driven by a strong customer response to Old Navy and Gap.

The sales results of Gap came one day prior to the jobs report for December that could show retail hiring had slowed during the crucial shopping season for the holidays.

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