Gap shares tumble as it cuts year’s outlook

Gap, the largest apparelfocused retailer in the U.S., cut its full-year profit forecast after declining sales and heavy discounting dragged down results.

Earnings will be $2.38 to $2.42 a share this year, excluding some items, the San Francisco-based company said in a statement Thursday. The com- pany had previously forecast profit of as much as $2.80.

The outlook provided a bleak view of Gap’s holiday season, its biggest sales period of the year. The San Francisco-based company has struggled to adapt to fashion trends and get customers into stores, especially at its Gap and Banana Republic chains. And even sales at its Old Navy division, long a bright spot, missed analysts’ estimates last month. Gap also recently lost Old Navy President Stefan Larsson to Ralph Lauren, putting additional pressure on the company.

“A weak third quarter doesn’t bode well for the fourth quarter,” said Ed Yruma, an analyst at Keybanc Capital Markets. “The environment is worse than we all thought, but Gap wasn’t expecting the holidays to be a quick fix. It will take some time for them to get back to where they were.”

Gap fell a 1.2 percent to $25.09 Thursday after the results were announced. The shares already had declined 40 percent this year through Thursday’s close.

CEO Art Peck, who took the job in February, has reshuffled management in a bid to reignite the com- pany. He also announced last month that Banana Republic’s creative director, Marissa Webb, would step down. That chain has been particularly weak, with same-store sales plunging 12 percent last quarter.

Peck has said that his comeback plan will begin to pay off in the spring, signaling that the holidays will be a tough stretch for the retailer.