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Investing.com -- Gap Inc (NYSE:GAP) reported better-than-expected fourth quarter earnings and revenue, sending shares soaring more than 18% in premarket trading Friday. The apparel retailer also announced a 10% increase to its quarterly dividend.
Gap posted adjusted earnings per share of $0.54 for Q4, surpassing analyst estimates of $0.36. Revenue came in at $4.1 billion, slightly above the consensus forecast of $4.07 billion. Comparable sales increased 3% YoY in the quarter.
"We ended the year delivering another successful quarter, exceeding financial expectations and gaining market share for the 8th consecutive quarter," said President and CEO Richard Dickson.
For the full fiscal year 2024, Gap reported net sales of $15.1 billion, up 1% compared to the previous year. Comparable sales rose 3% for the year. The company generated operating income of $1.1 billion, an increase of over 80% versus fiscal 2023.
Gap provided guidance for fiscal 2025 (FY25), projecting net sales growth of 1% to 2% and operating income growth of 8% to 10%. For Q1 2025, the company expects net sales to be flat to up slightly compared to Q1 2024.
Commenting on the report, Barclays (LON:BARC) analysts said the initial guidance "looks conservative and beatable."
"GAP remains one of our top Retail ideas for a cyclical recovery name into 2025 as it shifts from solidifying operations to growth mode, paving the way for multi-year profitable growth," they noted.
The retailer’s board also approved a Q1 fiscal 2025 dividend of $0.165 per share, representing a 10% increase from the previous quarter’s dividend.
Bank of America analysts said they are "encouraged by a more consistent sales trajectory but remain cautious of further margin improvement," maintaining a Neutral rating on Gap shares.
The bank also trimmed its price target to $25 from $28 while raising earnings estimates for fiscal 2025 and 2026.
Gap ended the year with $2.6 billion in cash and equivalents, up 38% from the prior year. The company repurchased 3 million shares for approximately $75 million during Q4.
Luke Juricic contributed to this report.