Gap's Profit Slides, But Meets Views

Updated from 5:04 p.m. EDT

Gap (GPS Quote - Cramer on GPS - Stock Picks) reported a 26% plunge in first-quarter earnings as both same-store sales and margins declined, but the results were near the better end of the retailer's forecast.

The San Francisco-based company's earnings slid to $178 million, or 22 cents a share, from $242 million, or 28 cents a share, a year earlier.

The results included charges of $45 million, or 3 cents a share, related to losses from Gap's soon-to-be-closed Forth & Towne concept.

Excluding the charges, earnings were 25 cents a share, at the high end of Gap's projection of 23 cents to 25 cents. Analysts polled by Thomson Financial predicted earnings of 24 cents a share.

Sales rose to $3.56 billion from $3.44 billion, edging past Wall Street's forecast of $3.48 billion.

Same-store sales, or sales at stores open at least a year, fell 4% on top of a 9% drop in the year-ago period. The bottom line also was hurt by a drop in gross margin, which fell 2.1 points to 38.1% amid increased markdowns at the Gap brand.

Gap, the owner of the Gap, Banana Republic and Old Navy chains, is struggling to turn around a sales decline that has lasted more than two years. Since the ouster of CEO Paul Pressler in January, the company has installed several new executives across each of its brands in hopes of jumpstarting a revival. Just Wednesday, the company named high-fashion designer Patrick Robinson as the design chief for its namesake chain.

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