Same-store sales at The Gap Inc. (GPS) declined 4% for the four-week period ended May 28, 2011.

Same store sales for the four-week period ended May 29, 2010 had increased 1% .

The company’s net sales for May inched up 0.95% year over year to $1.06 billion. 

Gap reported a decline in same store sales for every region where it operates. The company’s same store sales in North America declined 4%, wider than a decline of 2% in May 2010. Banana Republic North America declined 6% compared with growth of 2% in the prior year period.

Old Navy North America declined 1% versus an increase of 1% in May 2010. International region declined 9% in May 2011 compared with a growth of 8% in the prior year period.

Competitor The TJX Companies, Inc. (TJX) reported an increase of 2% in same store sales for the four-week period ended May 28, 2011. However, the result was lower than an increase of 4% in the year ago period. Sales for the four-week period ended May 28, 2011 were $1.7 billion, up 7% year over year.

Gap reported first-quarter 2011 earnings of 40 cents per share, which declined 11.1% from last year’s 45 cents but was a penny ahead of the Zacks Consensus Estimate. The drop in quarterly performance was primarily due to a sluggish top-line performance coupled with the rise in input cost.

In the earnings conference call, Gap lowered its fiscal 2011 earnings guidance to between $1.40 and $1.50, compared to the earlier expectation of $1.88 to $1.93 per share.

The Zacks Consensus Estimate for second-quarter 2011 is 31 cents per share. For full years 2011 and 2012, the Zacks Consensus Estimates are $1.50 and $1.79 per share, respectively.

We are maintaining our Neutral rating on Gap Inc. The quantitative Zacks #4 Rank (short term Sell rating) on the stock indicates downward pressure on the shares over the near term.

Based in San Francisco, California, The Gap Inc. is a premier international specialty retailer offering a diverse range of clothing, accessories, and personal care products for men, women, children and babies. Its flagship brands include Gap, Banana Republic, Old Navy, Piperlime and Athleta.

 
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