By Anuja Bharat Mistry
(Reuters) -Gap beat fourth-quarter sales and profit estimates on Thursday, as CEO Richard Dickson's turnaround strategy helped attract customers to its apparel brands including Old Navy and Banana Republic during the holiday quarter.
The company's shares jumped about 15% in extended trading.
Shoppers, who were saving up over the year to splurge during the festive season, flocked to grab fresh and trendy styles, driving sales for companies such as Gap and Under Armour as they stock up their shelves with in-demand items.
Gap's fourth-quarter net sales of $4.15 billion beat average analysts' estimate of $4.07 billion as per data compiled by LSEG.
Comparable sales in Old Navy, Gap's biggest revenue generator, were up 3% in the quarter ended February 1, after coming in flat in the third quarter.
It earned quarterly profit of 54 cents per share, beating the average estimate of 37 cents per share.
"Our brands are resonating and we continue to gain relevance and market share, which we think gives us pricing power in the market," Katrina O'Connell, Gap's finance chief said on the post-earnings call.
It expects net sales growth for fiscal 2025 to be between 1% and 2%, the midpoint of which is slightly below estimates.
Gap's forecast reflects the current macroeconomic environment and headwinds to consumer spending, including inflation, tariffs, supply chain disruptions and currency volatility, according to its earnings statement.
"The company's relatively bullish sales forecast shows that it expects turnaround efforts to continue bearing fruit, even amid a difficult environment for discretionary sales. It helps that the company sources less than 10% of its inventory from China, although it could still be exposed to reciprocal tariffs," eMarketer analyst Rachel Wolff said.
Apparel makers including Abercrombie & Fitch, much like retail giants Walmart and Target, have provided bleak forecasts as they expect rising inflationary concerns fueled by President Donald Trump's import tariffs to strain consumer budgets.
(Reporting by Anuja Bharat Mistry in Bengaluru; Editing by Alan Barona)