Gap Posts 11% Drop in Same-Store Sales, Twice Analysts’ Expectations

SAN FRANCISCO — Gap Inc., the largest U.S. clothing chain, said that sales at stores open at least a year fell 11% in March--more than double forecasts--as same-store sales dropped at its U.S. Gap and Old Navy stores.

Gap shares, which closed at $49.50 on the New York Stock Exchange, dropped to $43.38 in after-hours trading. The retailer, whose other chains include GapKids and Banana Republic, reported its results after the close of New York markets.

The drop in same-store sales is Gap’s first since April 1997 and exceeds analysts’ projections of a decline of 3% to 5%. Gap said sales were hurt by the comparison with last year, when markdowns helped boost sales 21%, and the shift of Easter holiday sales to later in April.

The company, in a conference call, said it still expects to meet its earnings forecasts for the quarter and the year, because fewer markdowns helped lift gross margin--the amount of profit made from each sale--to the highest level in at least 10 years.

“People weren’t expecting such an improvement in gross margin,” said analyst Dorothy Lakner at CIBC World Markets, who rates the stock a “strong buy.”