Gap smarter on return to basics

US clothing retailer Gap saw a spectacular rebound in its Old Navy and Gap stores in the second quarter, raising hopes that it has turned the corner from a recent sales slump.

Profits for the group in the three months to June more than tripled to $209.3 million (£132.7 million) from $56.8 million a year earlier while revenue rose 13% to $3.69 billion. Same-store sales rose by 10%.

Analysts said the results showed that the group's return to basic styles such as jeans and button-down shirts was proving a major success after its unsuccessful foray into more-adventurous fashions.

The new strategy was put in place by Paul Pressler, who became chief executive last September. A year ago, same-store sales fell in all three of the group's stores chains - Gap, Banana Republic and Old Navy.

Gap shares yesterday jumped 50 cents in late trading in New York to $20.15, leaving them with a 63% increase so far this year.

The Old Navy subsidiary, which sells the group's cheapest range of clothes, led the recovery. Sales rose to $1.5 billion from $1.3 billion.

Gap has cut the number of outlets in the US - which many analysts had thought was too large - by 39, leaving it with 2284 stores. Sales in US Gap stores open more than a year rose by 9%.

The sales push has been built around more-aggressive advertising. In the last week of the second quarter, the company aired television commercials showing singers Madonna and Missy Elliott desporting themselves in Gap corduroy jeans.

Martin Bukoll, an analyst at Northern Trust, said: "New management has executed well on the basic concept."

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