Gap Stores’ Dividend Hike Can’t Hide Lower Profit

February 27, 2014 by Paul Ausick

Gap_logoGap Stores Inc. (NYSE: GPS) reported fourth-quarter and full-year 2013 results after markets closed Thursday. For the quarter, the clothing retailer posted diluted earnings per share (EPS) of $0.68 on revenues of $4.58 billion. In the same period a year ago, the company reported EPS of $0.73 on revenues of $4.73 billion. Third-quarter results compare to the Thomson Reuters consensus estimate for EPS of $0.66 on $4.6 billion in revenues.

For the full year, the retailer posted EPS of $2.74 on revenues of $16.15 compared with year-ago EPS of $2.33 on revenues of $15.65 billion. Consensus estimates called for EPS of $2.73 on revenues of $16.18 billion.

Gap increased its dividend by 10% beginning with the payment due in April. The company will now pay an annual dividend of $0.88 per share.

Same-store sales rose 1% in the fourth quarter, compared with a rise of 5% in the same period a year ago. On a constant currency basis, net sales rose 5%.

Gap forecast fiscal year 2014 EPS at $2.90 to $2.95, including a negative impact of 5% due to currency translation. Without the currency exchange impact Gap believes its EPS growth would be in the double-digits.

Online sales rose 21% year-over-year to $2.26 billion or about 14% of total sales.

The weakness here is in the slow growth of same-store sales at the company’s bricks and mortar locations. The company’s Banana Republic stores posted a negative 1% in same-store sales and Old Navy stores posted growth of just 2%. Gap stores posted an increase of 3% in global same-store sales. But U.S. sales accounted for 78% of the company’s total sales. Gap needs to lower that figure.

Shares traded down about 1.5% in the after-hours market, at $43.01 in a 52-week range of $32.35 to $46.56. The consensus target price for the shares was around $45.10 before this report.

Sponsored: Attention Savvy Investors: Speak to 3 Financial Experts – FREE

Ever wanted an extra set of eyes on an investment you’re considering? Now you can speak with up to 3 financial experts in your area for FREE. By simply
clicking here
you can begin to match with financial professionals who can help guide you through the financial decisions you’re making. And the best part? The first conversation with them is free.


Click here
to match with up to 3 financial pros who would be excited to help you make financial decisions.