Gap's Profit Climbs

But quarterly same-store sales decline.
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SAN FRANCISCO - Retail giant

Gap

(GPS) - Get Report

saw first-quarter profit jump, but the company's revenue fell short of analysts' expectations.

Net income during the quarter rose 40% to $249 million, or 34 cents a share, compared with $178 million, or 22 cents a share a year ago. Analysts had been expecting EPS of 30 cents.

Sales of the San Francisco-based retailer fell to $3.38 billion in the quarter from $3.55 billion a year ago. That was lower than analysts' expectations of $3.42 billion in revenue.

Comparable-store sales during the quarter decreased 11%, compared with a decrease of 4% in the first quarter of the prior year. Online sales increased 21% to $236 million vs. $195 million the year before.

Shares of Gap were up 30 cents, or 1.6%, to $18.59 in recent extended trading.

Gap, which competes with stores such as

Macy's

(M) - Get Report

and

Kohl's

(KSS) - Get Report

also owns the Old Navy and Banana Republic brands.

First-quarter comparable store sales at Old Navy were down 18%, compared with a decrease of 5% a year ago. Banana Republic North America comparable store sales were down 4% in the quarter vs. a decrease of 2% a year ago.

The flagship Gap stores saw comparable-store sales down 7% during the first quarter, compared with a decrease of 4%, the year before.

Gross margin for the quarter rose 1.5 percentage points to 39.7% compared with the prior year. Operating margin was 11.3%. Gap expects operating margin to be 8.5% to 9.5% for the current fiscal year.

GAP reaffirmed its fiscal year 2008 earnings forecast of $1.20 to $1.27 a share. Analysts are expecting EPS of $1.25 a share for the year.

During the first quarter, GAP repurchased about 11 million shares for $216 million and paid a dividend of about 8 cents a share.