Gap Drops After Hours on Disappointing Earnings, Weak Same-Store Sales

A major quarterly slip for the Gap Inc. (GPS) .

Shares of the San Francisco-based retailer dropped more than 8% in after-hours trading on Thursday, May 24, following a fiscal first-quarter earning report that showed companywide same-store sales rise just 1%, compared with 2% a year ago. Analysts were expecting a gain of 1.7%.

Also troubling were lackluster results for Old Navy, a key growth driver for the company, to an increase of 3% in same-story sales compared with a much larger rise of 8% a year ago. Banana Republic had a solid showing, however, from negative 4% last year in same-store sales to positive 3% growth this year. The Gap brand was flat, negative 4% for both years.

Quarterly net income rose to $164 million, or 42 cents a share, compared with income of $143 million, or 36 cents a share, a year ago. But analysts were expecting net income of 46 cents a share.

Total sales rose 10% to $3.8 billion compared with $3.4 billion a year ago.

The company affirmed its full-year EPS in the range of $2.55 to $2.70. Cash and cash equivalents dropped to $1.2 billion from $1.6 billion last year for the quarter.

In spite of the misses, the company is upbeat about the future.

"Despite the pressures we faced in the first quarter, we are affirming our full-year guidance, reflecting our confidence in the underlying fundamentals of the business as well as the benefits of executing against our balanced growth strategy," Teri List-Stoll, the company's chief financial officer, said in a statement.

Gap shares closed Thursday at $32.95, a gain of 3% after regular trading.

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