Gap profit up but sales down

Gap Inc. closed out its third consecutive year of declining sales with a 21% increase in its fiscal fourth-quarter profit, reflecting gains from cost cutting triggered by the worst slump in the clothing retailer’s history.

Gap’s management said the San Francisco-based company would try to weather “volatile” economic conditions by becoming even more frugal this year.

Gap earned $265 million, or 35 cents a share, during the three months that ended Feb. 2, compared with $219 million, or 27 cents, a year earlier.

Revenue totaled $4.68 billion, a 5% decrease from $4.92 billion in the previous year.

Sales at stores open at least a year fell 3%. It marked the 14th consecutive quarterly decline in Gap’s comparable-store sales, the company’s deepest funk since co-founders Donald and Doris Fisher opened Gap’s first store in 1969.

In an effort to placate shareholders while management tries to revive sales, Gap announced plans to spend $1 billion buying back its stock and raised its quarterly dividend by 6% to 34 cents a share.

Those moves, coupled with the continued emphasis on controlling costs, seemed to please investors. Gap shares surged $1.15, or 5.9%, in extended trading after dropping 42 cents to close at $19.45.