DOW JONES NEWSWIRES

Gap Inc.'s (GPS) fiscal third-quarter profit climbed 25% on strong sales at its long-struggling Old Navy chain, which posted an increase after five straight years of declines.
The company also announced a $500 million stock buyback effort Thursday.
Chairman and Chief Executive Glenn Murphy said the casual-apparel retailer's operating margin in the quarter was the highest in a decade. He added Gap, whose market value is about $15.5 billion, is focused on gaining market share during the holiday shopping season.
The company, which also owns the Banana Republic chain, has been trying to turn around its business by focusing on maintaining leaner inventory and traffic-driving promotions. Last month, the company said it will invest more in online and international operations, and will return to television after a two-year absence.
For the quarter ended Oct. 31, Gap reported a profit of $307 million, or 44 cents a share, up from $246 million, or 35 cents a share, a year earlier. Earlier this month, Gap predicted 42 cents to 44 cents, above analysts' then-estimate. At that time, the company reported revenue rose 0.8% to $3.59 billion and same-store sales were flat.
Gross margin rose to 42.5% from 38.7% and operating margin increased to 13.9% from 11.1% despite such costs rising $40 million because of fall marketing for Gap and Old Navy. The company expects operational costs in the fourth quarter to rise $100 million to $120 million over a year ago on higher marketing costs and store-related expense aimed at improving same-store sales.
Inventory per square was down 9% as of Halloween.
Gap opened 13 stores and closed 15 during the quarter, ending with 3,143 locations. The company expects to open about 50 stores and close about 100 this fiscal year.
During the quarter, the company repurchased about 4.1 million shares for $91 million. That included about 600,000 shares from the family of founder Donald Fisher, who died in September, as part of previously announced purchase agreements. As part of the $500 million effort, $20 million will be bought from the Fishers.
Gap's shares were down 1.6% to $21.52 in after-market trading from the close of $21.86.
-By Kathy Shwiff, Dow Jones Newswires; 212-416-2357; Kathy.Shwiff@dowjones.com

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(END) Dow Jones Newswires
11-19-09 1608ET
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