The Gap’s stock is up 19% after the clothing retailer reported much better third quarter financial results than had been expected on Wall Street.
The San Francisco-based company announced earnings per share (EPS) of $0.59 U.S. compared to $0.19 U.S. that was forecast among analysts.
Revenue in the quarter came in at $3.77 billion U.S. versus $3.60 billion U.S. that had been expected. Sales were down about 7% from $4.04 billion U.S. a year earlier.
Gap, which also owns and operates Old Navy, reaffirmed its full-year guidance but gave a cautious outlook for the current year-end holiday quarter, saying sales are likely to be flat.
Regardless, Gap’s stock jumped nearly 20% higher in extended trading on news of the latest financial results.
Gap’s same-store sales were much better than expected. They fell only 2% compared to an 8.7% slowdown that analysts had expected.
For the third quarter in a row, Gap improved its gross margins due to lower commodity costs and cost-cutting initiatives that have included the layoffs of 2,000 workers.
During the latest quarter, Gap’s gross margin improved by 3.9 percentage points to 41.3%, which came in ahead of the 38.9% that analysts had forecast.
The strong results come after Gap named former Mattel (MAT) executive Richard Dickson to be its new chief executive officer (CEO).
Dickson was credited with reviving the Barbie franchise during his time at Mattel and is now trying to turn around The Gap.
Prior to today (Oct. 21), The Gap’s stock had risen 21% to trade at $13.67 U.S. per share. However, the stock is down 47% over five years.