Specialty Numbers: Gap Stars as Markdowns Hit Competition

Gap Inc. scored twice on Thursday, once with strong second-quarter earnings and again by coaxing Patricia DeRosa out of her retirement.


Ongoing difficulties at its Lane Bryant brand offset incremental cost-cutting benefits, as Charming Shoppes posted a 26.8 percent reduction in second-quarter profits.

The Bensalem, Pa.-based specialty retailer of plus-sized apparel said income for the three months ended Aug. 2 receded to $18.6 million, or 15 cents a diluted share, including a 3 cent expense related to its cost reduction plan. That compares with income in the year-ago quarter of $25.5 million, or 20 cents. Sales for the quarter decreased 5.1 percent to $605.5 million from $638.3 million and dipped 1 percent on a comparable-store basis.

“We began to realize the benefits of our cost-reduction initiatives, which enabled us to exceed our earnings projection this quarter,” said Dorrit Bern, chairman, chief executive and president of the 2,240-unit chain.

However, she said, the disappointing performance at Lane Bryant more than offset the comp increases at its Fashion Bug and Catherine’s Plus Sizes stores. By division, LB’s comps, which have been negative since July 2002, fell 9 percent, offsetting gains at FB and Catherine’s of 3 and 4 percent, respectively. In the quarter, LB’s sales accounted for 36 percent of the company’s, compared with 50 percent at FB and 14 percent at Catherine’s.

The company reaffirmed its break-even earnings expectations for the third quarter, assuming a midsingle-digit comp decline in August and improving to flat comps for the quarter.

Bern said she expects LB’s comps to turn positive by the end of the third quarter, driven by a new wear-to-work floor set called Metroline.

For the first half, CS reported earnings of $28.3 million, or 24 cents, including a 5 cent cost-reduction charge. In the year-ago period, it reported a loss of $6.4 million, or 3 cents a diluted share. However, before the negative effects of an accounting charge last year, the firm recorded income of $42.7 million, or 34 cents. Sales for the six months decreased 7.8 percent to $1.17 billion from $1.27 billion and dropped 4 percent on a comp basis.


Struggling to gain sales traction, The Wet Seal Inc. logged a net loss of $13.4 million, or 45 cents a diluted share, in the 13 weeks ended Aug. 2. The deficit matched the low end of the earnings guidance the firm provided on July 10 and was 5 cents below consensus estimates. The loss comes against net income of $3.7 million, or 12 cents a share, in the year-ago quarter.
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