Why Gap Shares Are Jumping After The Bell

Gap Inc GPS shares are trading higher after the close Thursday after the retailer turned in a profitable quarter on an adjusted basis, despite analysts forecasting a significant loss. The surprise beat was driven by improving margins. 

• Q1 Revenue: $3.28 billion missed estimates of $3.29 billion
• Q1 EPS: 1 cent beat estimates for a loss of 17 cents

Comparable sales were down 3% year-over-year, same-store sales fell 4%, and online sales decreased 9%, but margins climbed to 37.1%, driven by lower air freight expense and improved promotional activity. 

"We continue to take the necessary actions to drive critical change at Gap Inc., ultimately getting us back on a path toward delivering consistent results long-term," said Bob Martin, executive chairman and interim CEO of Gap.

"While the macro and consumer environment remain uncertain, Q1 underscores our ability to deliver improvements to the business, including share gains at Old Navy and Gap Brand, adjusted operating margin expansion, reduction in inventory, and strength in our balance sheet."

Gap said it expects second-quarter net sales to decrease in the mid to high-single-digit range, and full-year sales could decrease in the low to mid-single-digit range. Gross margins are expected to continue to expand in the second quarter and the full fiscal year. 

See Also: What's Going On With Ulta Beauty Shares After The Close?

GPS Price Action: Gap shares were up 15% after hours at $8.53 at the time of publication, according to Benzinga Pro.

Photo: Mike Mozart from Flickr.