Gap reports drop in fourth-quarter profits

FASHION chain Gap reported a 40 per cent drop in fourth-quarter profit as it wrestled with higher costs and had to discount heavily to attract shoppers during the crucial holiday season.

The US firm, which operates the Banana Republic, Old Navy and Athleta chains as well as the eponymous Gap brand, has struggled for years to reclaim its former fashion status.

Its Gap chain has reported like-for-like yearly sales drops for the past seven years at its North American stores. A slowly recovering world economy and rising costs have only compounded the clothing seller’s woes.

The clothing chain said yesterday that it made net profits of $218 million (£138m), or 44 cents per share, in the three months to 28 January. That compares with $365m in the same period last year, despite sales staying almost flat at $4.28 billion.

But the firm announced a new $1bn share repurchase and hiked its annual dividend by 11 per cent.