August 25, 2008, 12:00 AM

Gap`s web sales shine while store sales sag

The Gap Inc. posted sharply higher net earnings in the second quarter, but it’s still the web – and not stores – that remains as its sales growth engine. Web sales rose 11%, while total sales and comparable store sales fell 5.4% and 10%, respectively.

Katie Evans

Managing Editor, International Research

The Gap Inc. posted sharply higher net earnings in the second quarter, but it’s still the web – and not stores – that remains as the company’s sales growth engine.

Second quarter web sales for Gap, No. 24 in the Internet Retailer Top 500 Guide, grew by 11% to $191 million from $172 million in Q2 of 2007. At the same time, Gap’s total sales declined by 5.4% to $3.5 billion from $3.7 billion in the second quarter of the prior year while comparable store sales dropped year over year by 10%. Through aggressive cost savings, Gap’s second quarter net earnings improved by 50.7% to $229 million from $152 million in the second quarter of 2007.

For the second quarter ended Aug. 2, the web accounted for 5% of total sales. In the first six months of the year, e-commerce revenue for Gap grew by 16.4% to $427 million from $367 million in the prior year. During the same period, Gap’s total sales declined 4.2% to $6.9 billion from $7.2 billion during the first six months of 2007. However, the company’s net earnings increased to $478 million in the first two quarters of 2008 vs. $331 million in the same period last year.

“External conditions aside, we continue to deliver improved earnings with healthy margins and I am pleased with our second quarter results,” says Gap CEO Glenn Murphy. “While we continue to pursue our 2008 financial strategy, we are very focused on bringing more customers into our stores.”

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