Gap's Q3 Profit Rises, Tops Estimates

San Francisco, CA (AHN) - Gap Inc. announced Thursday third quarter earnings rose 3.4 percent as margins increased due to cost cutting measures and lower inventory levels.

The clothing retailer posted third quarter earnings of $246 million or 35 cents a share, up from $238 million or 30 cents a share in the same period a year ago. Revenue was weak, falling 8 percent to $3.56 billion from $3.85 billion.

Earnings results were slightly better than estimates for 34 cents a share, while revenue was basically in-line, according to Thomson Reuters.

"We are definitely more competitive than we were last year," said Chairman and CEO Glenn Murphy, according to the Associated Press.

"While we expect the challenging economic environment to continue, we'll focus on offering our customers an engaging store experience and products at the right value proposition to stand out this holiday season," he added.

Same-store sales were weak, falling 12 percent in the quarter. The largest drop came from the company's Old Navy stores where sales dropped 16 percent. High-end brand Banana Republic saw sales fall 11 percent in the third quarter, while Gap's namesake stores held up best with a 7 percent decline.

Gap began a cost cutting initiative earlier in the year and saw inventory per square fall 13 percent in the third quarter. The company said it will continue reducing its real estate holdings and aims to cut total holdings by 10 to 15 percent over the next three years.

The company expects full-year earnings of $1.30 to $1.35 a share. Analysts are looking for $1.33 as share.