Cost cutting boosts results

Apparel chain Gap Inc. reported that its fiscal third-quarter profit rose 3.4% as cost-cutting efforts like inventory control offset a sales slump. The company also affirmed its profit guidance for the full year.

The San Francisco company said after the markets closed that it earned $246 million, or 35 cents a share, in the three months ended Nov. 1. That compares with $238 million, or 30 cents, a year earlier. Sales fell 7.6% to $3.56 billion.

Analysts surveyed by Thomson Reuters had expected earnings of 34 cents a share on revenue of $3.57 billion.

Gap noted that its same-store sales, or sales at stores open at least a year, dropped 12% in the quarter, compared with a 5% drop in the year-earlier period. Same-store sales are considered a key indicator of a retailer’s health.

Gap’s biggest problem has been its Old Navy chain, which saw an 18% decline in same-store sales for the quarter. The chain’s fashions are being overhauled to cater to bargain-hunting moms.

To turn business around, Gap also plans to eliminate 10% to 15% of its real estate holdings by creating smaller stores and closing units over the next three to five years in hopes of increasing productivity.

The company said it expected full-year earnings to be in the range of $1.30 to $1.35 a share. Analysts estimated $1.33 a share.