Gap Inc. said Thursday that rising sales abroad, online and at its higher-price Banana Republic and lower-price Old Navy chains helped its fourth-quarter net income rise nearly 4 percent and made up for the Gap brand's weakness.
The company also announced that it plans to buy back $2 billion in shares, on top of recent repurchases totaling $2.6 billion, and it will raise its dividend by 5 cents to 45 cents for the year.
And it issued an annual profit forecast that fell short of what Wall Street was expecting; it said its operating profits would be squeezed as it grapples with soaring costs of raw materials, particularly cotton.
The retailer, based in San Francisco, reported quarterly net income of $365 million, or 60 cents per share. That compares with $352 million, or 51 cents per share, a year earlier. Revenue rose 3 percent to $4.36 billion.
Analysts expected adjusted earnings of 57 cents per share and revenue of $4.34 billion, according to FactSet.
Quarterly revenue at stores open at least a year was the same as a year earlier for the company as a whole. The comparison is considered a key indicator of a retailer's long-term health because it excludes stores that recently opened or closed.
In the company's Gap division in North America, the measure fell 2 percent, capping yet another year of declines. The figure has been falling on an annual basis for the Gap brand since 2005, and that has analysts wondering how long it will take to turn the division around.
At both Banana Republic's and Old Navy's domestic divisions, the figure rose 1 percent for the fourth quarter.
The Gap chain has closed stores, and its profit has risen, but it is having a hard time increasing its sales. Gap Inc. announced earlier this month that Art Peck, 54, will replace Marka Hansen as leader of the Gap brand for North America. Hansen had been with the company for 24 years.
Other personnel changes include installing Pam Wallack, the current president of Gap Adult North America, as head of Gap's new global creative center and moving significant marketing work to New York from San Francisco. From New York, Wallack will work with the company's divisional presidents based in London, Tokyo, Shanghai and San Francisco.
The chain's overhaul of its jeans for fall 2009 was seen as a success, followed by good reaction to its black pants in fall 2010, but the Gap remains in a rut.
Old Navy's sales started rebounding in late 2009, reversing 60 months of losing market share, and some credit its return to its roots with an ad campaign catering to frugal moms. But its sales growth remains tepid. Meanwhile, Banana Republic regained its footing by selling more casual work clothes after its sales slipped during the recession.
Chairman and CEO Glenn Murphy said during a conference call with investors Thursday that all three brands need to improve in North America.
"Through the year, by brand and in certain categories, there is no question we had home runs," he said. "We had some phenomenal, creative, innovative product that customers absolutely came into the stores or online and wanted to buy. But consistently, by season, we're still not there."
The company has been expanding globally, adding its first stores in China and Italy last year. It now sells its wares online in more than 90 countries. And it is continuing to remodel Old Navy stores with the goal of having nearly 400 in a new format by year's end.
The company plans to open about 75 new franchise stores and 50 company-owned stores abroad, including 10 to 15 in China, eight to 10 in Italy and 25 outlet stores. Gap's agenda also includes adding eight to 10 Athleta stores in North America by the end of the year.
The company said it earned $1.2 billion overall for the full year, or $1.88 per share, compared with $1.1 billion, or $1.58 per share, the year before.
Looking ahead, the company expects 2011 net income of $1.88 to $1.93 per share. Analysts expect $1.94.
Gap's shares rose 16 cents to $22.49 in regular trading, and gained another 31 cents to $22.80 after hours. The earnings report was issued after the markets closed.