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Gap Inc reports below expectation Q3 results

Nov '05
Fashion retailer Gap Inc reported that net earnings for the third quarter, which ended October 29, 2005, of $212 million, or $0.24 per share on a diluted basis, decreased from $265 million, or $0.28 per share, for the same period last year.

Third quarter net sales were $3.9 billion, compared with $4.0 billion for the same period last year.

Comparable store sales decreased 7 percent, compared with a decrease of 1 percent in the third quarter of the prior year.

"Their third quarter results were unacceptable," said Gap Inc CEO and President Paul Pressler.

"However, the issues they face are fixable and they are aggressively executing plans to provide more compelling product and exceptional store experiences for their customers."

Month-to-date traffic trends have continued to deteriorate beyond anticipated levels.

As a result, the performance of the first holiday flows is below expectations.

Therefore, the company revised its guidance for fiscal year 2005 earnings per share to $1.12 to $1.17, down from $1.30 to $1.34.

The company ended the third quarter with $2.3 billion in cash and investments, of which $75 million was restricted.

This represents $1.8 billion more in cash and investments than funded debt.

For the 39 weeks ended October 29, 2005, free cash flow was an outflow of $120 million, compared with an inflow of $156 million last year.

The company now expects to generate $800 million to $900 million in free cash flow, down from its previous guidance of at least $1 billion in fiscal 2005.

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