Gap’s interim CEO promises to address ‘operational issues’

NEW YORK — Two weeks after Gap Inc. ousted its CEO Art Peck, the company’s interim leader promised investors it would address “operational issues” that have been dragging down the retailer.

The comments from Robert J. Fisher came as the San Francisco-based clothing chain released another quarterly earnings report that showed a sales slump. Fisher is the son of Gap co-founders Donald and Doris F. Fisher.

Fisher also said it is still in the midst of separating its low-priced Old Navy brand into its own separate publicly-traded company.

Shares rose 1% in late trading after the report was released.

Like many mall-based clothing chains, Gap is struggling to turn itself around as shoppers go online or to discounters like T.J. Maxx for their clothing. But Gap, which defined casual dressing in the 1990s, has also long struggled with its own deep-rooted problems — its offerings have failed to stand out from that of its rivals.

Peck had been promising investors that a turnaround is in the making. But instead, the chain has struggled with sales declines and has had to keep discounting its merchandise to get customers into its stores.

Gap reported fiscal third-quarter net income of $140 million. On a per-share basis, the company said it had profit of 37 cents. Earnings, adjusted for non-recurring costs and restructuring costs, came to 53 cents per share.

The results exceeded Wall Street expectations. The average estimate of 10 analysts surveyed by Zacks Investment Research was for earnings of 51 cents per share.

The clothing chain posted revenue of $4 billion in the period, also beating Street forecasts. Seven analysts surveyed by Zacks expected $3.95 billion.

The Gap Inc. said sales at established stores fell across all its brands during the fiscal third quarter. Old Navy fell 4%, Gap fell 7% and Banana Republic dropped 3%.

Gap expects full-year earnings in the range of $1.70 to $1.75 per share.

Gap shares have dropped 37% since the beginning of the year, while the S&P 500 index has risen 24%. Shares rose 27 cents to $16.48 in after-hours trading after the retailer saw shares lose 6 cents to $16.22 during the regular session.


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Anne D’Innocenzio, The Associated Press