NEW YORK (AP) — Gap Inc. reported a 9.4 percent increase in third-quarter earnings, but the fashion retailer maintained a conservative annual profit outlook that suggests a tough holiday quarter ahead.
Like many retailers, Gap, which operates stores under names including its namesake, Old Navy, Banana Republic and Athleta, is heading into a fiercely competitive holiday shopping season where merchants are ramping up sales. Gap has been doing its part by offering constant discounts and is trying to lure shoppers with an incentive that lets customers earn $25 for every $50 they spend through Friday
The results, nevertheless, were among a few bright spots in a third-quarter earnings season that has many retailers including Wal-Mart Stores Inc. and Kohl's Corp. lowering their guidance in an uncertain economy. Teen retailer Abercrombie & Fitch reported earlier Thursday a loss in its third quarter, dragged down in part by charges related to closing its Gilly Hicks stores. The teen retailer's sales softened and it said sales weakness continues in the fourth quarter.
"There's a little bit of fatigue out there when it comes to consumers so the question is, 'Are we disappointed in the consumer sentiment, or ... have we really not been innovative in order to give consumers a value proposition that doesn't look like wallpaper, day in, day out,?' " Glenn Murphy, Gap's CEO, told investors on a conference call after the results came out late Thursday.
Murphy added, "I think we've done a good job at Gap Inc. I think we can do a better job going forward."
New designer collaborations, brighter fashions and livelier stores have helped invigorate sales since early last year, but the trend toward bright colors has passed, and Gap is trying to figure the next thing that will get shoppers excited enough to buy.