Gap Q4 Profit Rises 61%, Topping Estimates; Raises Dividend 20% (GPS)

After the bell on Thursday, fashion retailer The Gap Inc. (GPS) reported an increase to its fourth quarter profit and revenue, topping Wall Street expectations. The company also boosted its dividend 20%.

The San Francisco-based company said its fourth quarter net income rose 61% to $351 million, or 73 cents per share, from $218 million, or 44 cents per share, a year earlier. According to Thomson Reuters, analysts were expecting GPS to earn 71 cents per share in the quarter.

The company, which owns Gap, Old Navy, and Banana Republic stores, had quarterly sales of $4.73 billion, up from $4.28 billion in the same period a year earlier; its same store sales were up 5%. The consensus Wall Street view was that Gap would see sales of $4.63 million in the quarter.

These positive earnings are the result of a long-term turnaround strategy that included management changes; after being accused of selling boring clothes the company has regained some fashion respectability.

Looking ahead, the company is projecting a full year EPS on the lower side of analysts’ estimates largely due to the negative impact from the weakening Japanese yen. Gap sees 2013 EPS between $2.52 and $2.60, while analysts foresees earnings at $2.59 per share.

Also announced on Thursday was that the company’s board has announced an increase to its quarterly dividend payout. The company will now payout a quarterly dividend of 15 cents per share, up 20% from the previous payout of 12.5 cents per share, making the annualized dividend payout 60 cents per share. This dividend will be paid on May 1 with an ex-dividend date of April 8.

The Gap shares were up $1.26, or +3.83%, during pre-market trading on Friday. The stock is up +45.86% over the past twelve months.

The Bottom Line
Shares of The Gap (GPS) have a dividend yield of 1.82% based on last night’s closing price of $32.92 and the company’s updated annualized dividend payout of 60 cents per share.

The Gap Inc. (GPS) is not recommended at this time, holding a DARS™ Rating of 3.4 out of 5 stars.

Be sure to visit our complete recommended list of the Best Dividend Stocks, as well as a detailed explanation of our ratings system here.

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