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Gap’s 1st-quarter net income declines 22 percent

By WTOP Staff

ANNE D’INNOCENZIO
AP Retail Writer

NEW YORK (AP) — Gap said that its first-quarter profit fell 22 percent, as the clothing chain’s results were hampered by foreign currency fluctuations and a slow start to spring selling.

Nevertheless, the San Francisco-based retailer, which operates stores under the Gap, Old Navy, Banana Republic and Athleta names, reiterated its annual profit outlook.

“After a disappointing start, I’m pleased with how the business performed toward the end of the quarter, especially at Old Navy,” said Glenn Murphy, chairman and CEO of Gap Inc. in a statement.

Like many retailers, Gap’s business in the first quarter was hurt by heavy discounting to bring in customers who stayed away amid wintry weather earlier in the year. Murphy also acknowledged in an earnings call with investors that the fashions were a “little too spring forward.” Still, it’s faring better than rivals like American Eagle Outfitters Inc., which saw its quarterly earnings tumble 86 percent on huge markdowns intended to generate foot traffic. American Eagle said earlier in the week that it would close 150 stores over the next three years.

But Gap’s hiccup in the quarter underscore the challenges that the company faces in keeping the momentum going since enjoying a turnaround starting in early 2012. Gap has been stepping up its marketing and offering trendier merchandise.

Gap is also expanding outside the U.S. It announced last month it plans to more than triple sales in China in three years as it seeks to grab a bigger piece of the overall $1.4 trillion global clothing market. It generated $300 million in sales in China in the latest fiscal year ended Feb. 1. It says China will be its biggest growth initiative.

The company had 81 Gap stores in China at the end of last year and unveiled its first Old Navy store in the country earlier this year. It said Thursday it’s on track to open about 30 additional Gap stores in China in the current fiscal year.

Gap is also trying to meld its online business with its physical stores as it sees shoppers’ purchases influenced by the Web and mobile devices.

As part of that strategy, the chain is expanding a program it began testing a year ago that allows customers to reserve merchandise online and then pick it up at the store within 24 hours. By the end of the second quarter, it will have that service in all of Gap-branded stores. Overall, the service will be in more than 1,000 Gap and Banana Republic stores.

Gap earned $260 million, or 58 cents per share, in the three-month period ended May 3. That compares with $333 million, or 71 cents per share, in the year-ago period. The year-ago results benefited by 4 cents per share from the favorable resolution of tax matters.

The company said that currency fluctuations reduced first-quarter 2014 per-share results by about five percentage points.

Revenue rose 1.2 percent to $3.77 billion.

Analysts had expected a profit of 57 cents on revenue of $3.76 billion, according to FactSet.

Revenue at stores opened at least a year fell 1 percent in the quarter, reversing a string of quarterly gains for that measure. By division, Gap’s global business fell 5 percent, while Banana Republic slipped 1 percent. Old Navy’s global business rose 1 percent.

Murphy told investors that Old Navy is the one brand that is “furthest along” in terms of performance. He praised its assortment and noted the division is revamping its online site, which shoppers will see next month.

As for Banana Republic, he noted women’s business has “turned the corner.” He noted that Gap is moving in the right direction, and is moving toward a global assortment.

Athleta, whose roots were online, is on track to end the year with 100 U.S. stores, the company said.

Online sales increased 13 percent to $575 million for the first quarter.

Gap said that it still expects annual earnings per share of $2.90 to $2.95. Analysts had expected $2.94 per share.

Shares added 16 cents to $41.02 in after-market trading after closing up 30 cents to $40.86 in regular trading.

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Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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