Gap Beats Q2 Estimates As Cost-Cutting Efforts Pay Dividends

San Francisco, CA (AHN) - Gap Inc. reported Thursday a 51 percent rise in second quarter earnings as cost-cutting measures more than offset a drop-off in sales.

The apparel retailer posted profit of $229 million or 32 cents a share in the second quarter, compared to $152 million or 19 cents a share in the same period a year ago. Total revenue fell to $3.5 billion, down 5 percent from $3.69 billion last year.

The earnings results were ahead of the 30 cents a share analysts were expecting, according to a Thomson Financial poll. Revenue did come in light, though, as analysts had been looking for $3.52 billion for the quarter.

Same-store sales were the main driver in the revenue decline, falling 10 percent in the second quarter. The company's Old Navy stores saw the largest decline with same-store sales dropping 16 percent. Gap and Banana Republic stores saw 6 percent declines in same-store sales.

The company bumped total gross margin to 38.2 percent in the second quarter. That marks a 3.9 percent increase from last year.

"External conditions aside, we continue to deliver improved earnings with healthy margins and I am pleased with our second-quarter results," said Gap CEO Glenn Murphy, according to TheStreet.com. "While we continue to pursue our 2008 financial strategy, we are very focused on bringing more customers into our stores."

Gap stuck to its full-year earnings guidance of $1.30 to $1.35 a share. Analysts are expecting $1.34 a share for the year.

Shares of Gap moved 3.6 percent higher in after-hours trading.