Gap To Return To TV Ads, Expand Into China

Sabrina Simmons, chief financial officer, said that the company is positioned well, due to its focus over the last two years on delivering healthy merchandise margins, maintaining costs, generating strong free cash flow and improving the company's return on invested capital.

Gap earned $228 million, or 33 cents per share, in the second quarter ended Aug. 1. That compares with $229 million, or 32 cents per share, in the year-ago period. Overall sales fell to $3.25 billion from $3.50 billion a year ago.

Gap's international sales reached $361 million, down from $376 million in the year-ago period. The company's online business for the second quarter rose 17 percent to $224 million, compared with $191 million a year ago.

Gap's sales at stores open at least a year fell 8 percent, dragged down by double-digit sales declines at the North America divisions of Gap and Banana Republic. That measurement, considered a key indicator of a retailer's health, is important because it excludes new stores.

Like many apparel chains, Gap has suffered from shoppers' focus on necessities and away from nonessentials like trendy jeans. But the merchant has been in a better position than some rivals during the recession because it started slimming its inventory beforehand as part of its turnaround effort.