After years of tumbling,
took another small step forward Thursday.
True, the apparel giant reported its 27th consecutive month of declining same-store sales, which measure activity in shops open at least a year. But June marked the second straight month in which the drop was much smaller than expected. Perhaps even more importantly, the company said margins improved due to lower markdowns, suggesting the company is getting a handle on the rampant price cutting that had become an engine of Gap's decline.
San Francisco-based Gap, which runs the Gap, Old Navy and Banana Republic chains and is the nation's largest apparel seller, has been in a slide for over two years. But halfway through 2002, Gap's fortunes are starting to look brighter than they were at the beginning of the year.
Gap shares, which are basically flat on the year, were off 40 cents at $14.23. The stock is still well off its 52-week high of $30.68, but up considerably from its yearly low of $11.12.
Thursday morning Gap reported a 6% decline in June same-store sales. That doesn't sound great until one considers that not long ago declines of 20% or more weren't uncommon. On average, analysts had expected the company to report a decline of 9.3%, according to Ken Perkins at Thomson Financial/First Call.
"June sales across all brands were significantly better than expected," said CFO Heidi Kunz in a statement.
As a result of the strong June, some analysts were ratcheting up earnings estimates Thursday. Merrill Lynch's Mark Friedman, for instance, doubled his second-quarter earnings estimate to 4 cents a share. Gap is scheduled to report quarterly earnings on Aug. 15.
The latest evidence of progress builds on a welcome new trend for the company. In the first quarter Gap returned to profitability -- its first foray into the black since the previous year's second quarter. In May the company also reported stronger-than-expected same-store sales.
Meanwhile, concerns that a management change would hamper the turnaround have waned. CEO Mickey Drexler announced his intention to resign in May, causing some observers to fear Gap's fortunes could take a turn for the even worse. Now, many analysts say that a new CEO with nimble management skills -- Drexler was a merchandise specialist who admits he lacked an interest in management -- is just the tonic to spur the turnaround. Gap is expected to announce a new CEO sometime later this year.
Gap's news just one of the headlines in a mostly strong month for the nation's retailers. Overall sales jumped 5.4% at the more-than 30 major retailers tracked by Thomson Financial/First Call, compared with expectations for a 4.1% rise.
, the nation's largest retailer, same-store sales rose 7.9%, compared with expectations for a 6.5% jump. As a result, Wal-Mart raised its earnings guidance. The company now expects to earn 44 cents to 45 cents for the quarter that ends July 31, compared to previous guidance of 43 cents to 44 cents. For the full year, Wal-Mart now expects to earn $1.76 to $1.78, up from prior guidance of $1.74 to $1.76.
Wal-Mart shares were up lately 44 cents at $54.20.