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Gap’s Q3 Profits Leap 9.4%; Online Sales Surge

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Over the last week, third quarter earnings reports for major retailers have made for dark theater. Bucking this trend, Gap Inc. is celebrating good news, announcing that its profits jumped 9.4%, largely on the strength of sales abroad and online.

Gap reported a profit of $337 million, or 72 cents per share, for the third quarter, an improvement from this period last year, which saw a profit of $308 million, or 63 cents per share.

Sales in the US rose 1.5%, 3.5% in Canada, 6.8% in Europe and a hearty 11% in Asia. Net sales leapt 3.1% to $3.98 billion.

The heart of Gap’s success has been its revamped efforts at online sales, which spiked an impressive 20 percent. The retailer has orchestrated an aggressive push to cyber-sales, launching a “Reserve in Store” program which allows customers to purchase goods online to be retrieved later at a store of their choosing. They have also been experimenting with a marketing campaign on Tumblr called “Back to Blue,” an attempt to recruit potential customers with the promise of opportunities for social media participation. Finally, they invited Padmasree Warrior to join the board of directors, formerly chief technology and chief strategy officer for Cisco Systems, in an effort to translate his expertise into improved omnichannel capabilities.

Nevertheless, some industry analysts expressed concern that the Gap could suffer from excessive promotions during the holiday shopping season. In the third quarter, the company’s gross margin winnowed to 40% from 41.2% last year.

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