Gap's Net Drops 40 Percent but Results Top Forecasts

Gap reported a 40-percent drop in fourth-quarter net income as the clothing retailer grappled with higher costs and discounted heavily to get shoppers in its stores during the crucial holiday season.

The San Francisco clothing chain [GPS  Loading...      ()   ] said Thursday that it earned $218 million, or 44 cents per share, in the three-month period ending Jan. 28. That compares with $365 million, or 60 cents per share, in the year-ago period.

Revenue fell to $4.28 billion from $4.36 billion in the year-ago period. Revenue at stores opened at least a year, a key metric of a retailer's health, fell 4 percent.

Analysts had expected the company to report earnings excluding items of 42 cents per share on revenue of $4.29 billion, according to Thomson Reuters.

Looking forward, the company expects diluted earnings per share to be in the range of $1.75 - $1.80 for the fiscal year 2012.

In tandem with this positive forecast, Gap also announced a $1 billion share repurchase on Thursday, and approved a plan to increase the annual dividend per share from 45 cents in 2011 to 50 cents in 2012.

"There's no doubt that improving our performance, especially in our base businesses, is the top priority in 2012, and we're confident this is the right time to invest wisely to win back customers," said Gap's CEO Glenn Murphy.

After the announcement, shares of the company wavered in after-hours trading. Get after-hour quotes for Gap here. 

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