Gap Predicts Profit Shortfall

Gap (GPS Quote) appears to still have some distance to go on its continuing journey to find its way.

The long-suffering apparel retailer, coming off a decision to part company with its chief executive and a move to shut its Forth & Towne stores, said Thursday that its fourth-quarter earnings slumped from the same period a year earlier.

Additionally, this year's adjusted profits will likely miss analysts' consensus target, Gap said.

For the quarter ended Feb. 3, Gap earned $219 million, or 27 cents a share, compared with $337 million and 39 cents a share a year ago.

"We were not satisfied with our 2006 results and are taking action," said Bob Fisher, the interim president and CEO who took over from Paul Pressler earlier this year.

"In 2007, we are focusing on three priorities: fixing our core business by creating the right product and outstanding store experiences; retaining and developing the best talent in the industry; and examining our organizational structure to ensure that we enable our brands to make decisions and effect change more efficiently," he continued.

Sales for the fourth quarter were $4.93 billion, up from $4.82 billion the previous year. Same-store sales fell 7%.

Analysts surveyed by Thomson Financial were looking for quarterly earnings of 24 cents and revenue of $4.87 billion, meaning Gap beat on both lines.

However, looking ahead, Gap expects earnings, excluding Forth & Towne's anticipated loss of 4 cents, of 80 cents to 90 cents a share for the current fiscal year. Wall Street is calling for $1.

Despite the warning, shares of Gap were up 4 cents to $19.07 in after-hours trading.