GPS Gap Inc

By Khadeeja Safdar and Maria Armental 

Gap Inc. posted an 18% drop in quarterly profit Thursday as the apparel maker had its seventh straight period of declining sales and absorbed costs tied to store closures.

Sales fell 2% to $3.80 billion in the quarter ended Oct. 29, with the biggest declines at stores open for at least a year coming at the Gap brand and Banana Republic chains. Results in the latest period were also affected by a fire in August at one of the company's largest distribution centers.

Gap executives said Thursday the company is still struggling to draw shoppers into its stores. "We understand the fact that traffic is likely to continue to be challenging as we look forward," finance chief Sabrina Simmons said on a conference call.

Ms. Simmons is leaving the company and Teri List-Stoll, former chief financial officer of Dick's Sporting Goods Inc., will assume her duties on Jan. 17, the company announced earlier this week.

Gap has been struggling with a prolonged sales slump as fast-fashion rivals like H&M and Zara steal market share. The U.S. chain has resorted to discounts to move merchandise and has been shrinking its retail footprint. During the quarter, the company closed all its Old Navy stores in Japan and several Banana Republic stores.

On Thursday, the company said it now expects to close a net 65 company-run stores this fiscal year, up from the net 50 it projected at the end of the previous quarter. It recently decided to close its Banana Republic stores in the U.K. The company has 3,730 locations around the globe.

Retailers, gearing up for the holiday season, largely have reported positive results thus far, though there have been pockets of weakness, notably at department stores and apparel chains. For most companies, tighter inventories have translated into lesser and fewer discounts.

In the fiscal third quarter, Gap's profit was $204 million, down from $248 million a year ago. Same-store sales at the Gap brand and Banana Republic stores fell 8%, while Old Navy rose 3% in the period.

Gap's share price, which set a 52-week-high on Thursday during regular trading, fell 5% in late trading to $29.25.

Write to Khadeeja Safdar at khadeeja.safdar@wsj.com and Maria Armental at maria.armental@wsj.com

(END) Dow Jones Newswires

November 17, 2016 19:09 ET (00:09 GMT)

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