Gap Inc. posted a bigger quarterly profit on Thursday and quelled fears of a possible slowdown ahead of the holiday season as the retailer raised its profit view for the year, sending its shares up 3 per cent after the bell.
The owner of the Gap, Old Navy and Banana Republic chains expects to earn between $2.20 (U.S.) and $2.25 a share, up from its August forecast of $1.95 to $2.
Wall Street was expecting it to make $2.27 a share, according to analysts surveyed by Thomson Reuters I/B/E/S.
"When you're giving guidance, what's the point of being wrong on the upside? I think they are giving conservative guidance," said retail consultant Jan Kniffen.
"The stock's traded up because people were concerned about a slowdown in sales last month and thought it might be affecting their quarterly numbers," he said.
The company missed October same-store sales estimates, after topping them for many months before that.
Gap has staged a turnaround after a decade of critics derided its fashions as boring and it lost out to rivals such as Zara parent Inditex SA and homegrown competitors such as Forever21.
Banana Republic's tie-in with television show Mad Men was a big success. Redoing Gap's classic Khakis in bright colors proved to be a crowd pleaser.
The company said all three brands posted positive comparable sales in North America, with Old Navy rising 9 per cent.
For the third quarter, Gap earned $308-million, or 63 cents a share, compared with $193-million, or 38 cents a share, in the same quarter last year. Analysts were expecting the company to earn 63 cents.
Sales for the third quarter ended Oct. 27 rose 8 per cent to $3.86-billion.
Gap shares were trading up at $34.21 after the bell. They closed at $33.26 Thursday on the New York Stock Exchange.