Gap’s Net Income Falls 6.7% as Revenue Slides

Gap Inc., the largest U.S. clothing chain, said Thursday that fiscal first-quarter profit fell 6.7% after sales declined for the first time in three years and the company cut prices to clear goods.

Net income at the owner of Gap, Banana Republic and Old Navy stores declined to $291 million, or 31 cents a share, from $312 million, or 33 cents, a year earlier, the San Francisco-based company said. Sales fell to $3.63 billion from $3.67 billion.

Declining traffic at Gap’s three chains led to a 4% drop in comparable store sales, forcing markdowns. But Chief Executive Paul Pressler is adding more accessories and personal care items, remodeling Gap stores and later this year opening the company’s fourth chain -- Forth & Towne -- to try to lift sales, which declined 10 of the last 11 months at stores open at least a year. Forth & Towne will seek to appeal to women 35 and older.

“Their challenge is to get people back in the stores,” said Jon Shapiro, who helps manage about $625 million at Kovitz Investment Group in Chicago, which owns about 300,000 Gap shares. “On the fashion side, they aren’t necessarily finding their way.”

Gap was expected to earn 30 cents a share in the quarter ended April 30, the average estimate of 27 analysts surveyed by Thomson First Call. Gap said earlier that it still expected per-share profit this year to rise to $1.41 to $1.45 from $1.21 last year.

Shares of Gap rose 20 cents to $21.74 on the New York Stock Exchange. The results were released after the close of regular trading. In after-hours activity, shares gained a penny.

The consecutive monthly sales decline ended Pressler’s streak of increasing same-store sales for 20 months that began when he took over in September 2002.