Gap beats earnings and revenue estimates, hikes profit margin outlook as results are posted early

Gap raised its full-year profit outlook on Thursday after seeing better-than-expected results at its largest brand, Old Navy.

The apparel company’s fiscal second quarter results were released earlier than planned after the company “inadvertently” posted them to its website and then removed them, a Gap spokesperson told CNBC.

“As soon as the error was caught, we notified the NYSE and trading of our stock was halted temporarily,” the spokesperson said, adding the results were posted “as a result of administrative error.”

Gap’s stock was halted just before 10 a.m. ET. The company then released its quarterly results at 11:12 a.m. ET. Following the release, shares rose more than 2% after being halted for much of the morning.

Here’s what the company reported, compared with what Wall Street expected, according to analysts surveyed by LSEG:

• Earnings per share: 54 cents vs. 40 cents expected
• Revenue: $3.72 billion vs. $3.63 billion expected

The company’s reported net income for the three-month period that ended Aug. 3 nearly doubled from the year-ago period. Gap posted earnings of $206 million, or 54 cents per share, compared with $117 million, or 32 cents per share, a year earlier.

Sales rose to $3.72 billion, up about 5% from $3.55 billion in the prior-year period.

For the full year, Gap now expects its gross margin to be 2 percentage points higher than the uptick of at least 1.5 percentage points it had previously forecast. It also expects its operating income to grow by about 50%. It previously anticipated it would increase by slightly more than 40%.

Over the last year, Gap has been working to turn around its business, reverse a sales slump and reclaim cultural relevance under the direction of CEO Richard Dickson — the former Mattel executive credited with reviving the Barbie empire.

Since Dickson took over, sales have started to turn around at the company’s four brands — Banana Republic, Old Navy, Athleta and its namesake banner — and the company is finding its voice again among its peers. Beyond sales and relevance, Gap’s profits and balance sheet have also improved significantly under Dickson. The company ended the quarter with $2.1 billion in cash, cash equivalents and short-term investments, an increase of 59% compared to last year.

The company’s second-quarter results didn’t blow away expectations, but are solid improvements from where the company was a year ago.

“We really concentrated on our strategic priorities, and the first priority has been about maintaining financial and operational rigor that is becoming, to the extent that we can define it, the fabric of how we work, and it’s reinforcing better processes and cultural accountability,” Dickson told CNBC in an interview.

“Reinvigorating our brands is enabled by financial and operational rigor, and you see it. You see it in the results, you see it in our stores. You see it on our sites,” he added.

“We’re building stronger brand identities. They’re supported by trend right products,” Dickson said. “We’re amplifying those through better storytelling. Our media mix has gotten much more innovative, and generally speaking, I’m proud of the brand’s portfolio work in the context of cultural relevance.”

During the quarter, comparable sales were up 3%, in line with the 3.1% growth that analysts had expected, according to StreetAccount. Its gross margin came in better than forecast at 42.6%, ahead of the 40.8% that analysts had expected, according to StreetAccount.

Here’s a closer look at how each brand performed: