Gap (NYSE: GPS) came out with reasonable earnings. For the quarter ended August 2, 2008, net earnings were $229 million, or $0.32 per share on a diluted basis, compared with $152 million, or $0.19 per share, for the second quarter last year.
Second quarter net sales were $3.50 billion, compared with $3.69 billion for the second quarter of last year. The company's second quarter comparable store sales decreased 10%.
A closer look at the numbers, however, shows the extent to which Old Navy is pulling down Gap's results. Same-store sales at Old Navy's North American operations fell 16% on top of a 9% drop during the same quarter last year. Revenue for the division dropped from $1.5 billion last year to $1.3 billion. Most of Gap's other divisions held their own and online and international sales grew.
Gap would be a smaller company without Old Navy, but it would probably be a more profitable one. The company has 3,177 total stores and 1,065 of these are Old Navy outlets. At the very least, Gap should close any of these locations that are not showing year-over-year improvements.
Gap should be doing better, but Old Navy is a boat anchor.
Douglas A. McIntyre is an editor at 247wallst.com.
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