Daily Archives: February 24, 2012

Gap Forecast Trails Some Estimates as Old Navy Sales Decline

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February 24, 2012, 11:37 AM EST

 

By Ashley Lutz

Feb. 23 (Bloomberg) — Gap Inc., the largest U.S. apparel chain, forecast profit this year that was less than some analysts estimated as sales decline at its Old Navy stores.

Profit in the year ending in January 2013 will be $1.75 a share to $1.80 a share, San Francisco-based Gap said today in a statement. The average estimate of 31 analysts surveyed by Bloomberg was $1.80.

Chief Executive Officer Glenn Murphy failed to boost holiday sales at Old Navy after introducing a new marketing campaign for the more-than-1,000-store chain during the third quarter. The company yesterday said former Nike Inc. executive Jill Stanton will become creative adviser for Old Navy, which lost president Tom Wyatt last month.

“Old Navy is at the essence of the issue with Gap,” Craig Johnson, president of Customer Growth Partners in New Canaan, Connecticut, said in a telephone interview before results were announced. “They’ve made some cosmetic changes, but it’s going to have to be more radical to save the brand.”

Gap rose 0.3 percent to $23.60 at 4:11 p.m. in New York. The shares fell 16 percent last year.

Fourth-quarter net income fell 40 percent to $218 million, or 44 cents a share, from $365 million, or 60 cents, a year earlier, the company said. Analysts projected 42 cents, the average of 28 estimates compiled by Bloomberg.

Comparable-store sales at North American Old Navy locations and associated online sales fell 6 percent in the quarter, compared with a 4 percent decline for the company overall

Darden predicts strong 3Q, Olive Garden rebound

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Darden Restaurants Inc. said Thursday that very mild winter weather and an earlier start to the Lenten season, when many consumers turn to seafood or vegetarian options, helped drive positive same-store sales at its Red Lobster and Olive Garden chains.

The Orlando-based company said blended U.S. same-store sales for Olive Garden, Red Lobster and LongHorn Steakhouse for the third quarter, which ends Sunday, will increase about 4 percent, reflecting gains of 7 percent at LongHorn Steakhouse, 6 percent at Red Lobster and 2 percent at Olive Garden. It will be the first time in more than a year that Olive Garden posts positive quarterly same-store sales results.

Blended U.S. same-store sales for Darden’s Specialty Restaurant Group, which includes Seasons 52, Bahama Breeze and The Capital Grille, are expected to increase 6 percent for the third quarter, Darden reported.

“We’re pleased with the results we’ve seen thus far in the third quarter,” Clarence Otis, Darden’s chairman and chief executive said in a statement. “Each of our brands has solid sales momentum and, as we’ve anticipated for some time now, our year-over-year cost comparisons are trending in the right direction.”

The company said sales were driven by a calendar shift in the start of the Lenten season to the company’s third fiscal quarter from the fourth fiscal quarter a year ago. Red Lobster ties its typically successful, annual LobsterFest promotion to the start of Lent. Mild winter weather, as compared to last year, also helped drive consumer traffic.

Specifically, the estimated blended same-store sales growth for Olive Garden, Red Lobster and LongHorn Steakhouse gained about 70 basis points, or 0.7 percent, because of the Lenten season shift and about 200 basis points, or 2 percent, because of less severe winter weather.

Darden confirmed its annual guidance, which includes full-year U.S. same-store sales growth of between 2.5 percent and 3 percent for Red Lobster, Olive Garden and LongHorn Steakhouse; the opening of between 85 and 90 net new restaurants, excluding the addition of 11 Eddie V’s restaurants; total sales growth of between 7 percent and 7.5 percent; and diluted earnings per share growth from continuing operations of between 4 percent and 7 percent.

The company plans to release its full third-quarter results on March 23.