Gap's upbeat quarterly results show improving demand for Old Navy apparel

(Reuters) -Gap beat Wall Street expectations for fourth-quarter results on Thursday, buoyed by strong demand on improved product offerings at its Old Navy and namesake brands during the holiday season and on lower markdowns.

The company's shares rose 8% to $20.85 after the bell.

CEO Richard Dickson's plans to push ahead with reinventing Gap's brands, mainly Old Navy, have helped drive consumer interest in its clothing and accessories.

The Banana Republic parent had seen sales slump in the past several quarters as customers moved to competitors such as Amazon.com and Shein that offer compelling product assortments.

Fourth-quarter comparable sales at the Gap brand rose 4% and Old Navy saw a 2% increase, while Athleta and Banana Republic sales slumped 10% and 4%, respectively.

Lower supply-chain costs related to freight and manufacturing, and price increases on some products such as leggings and skinny jeans helped the company's gross margin jump 38.9%, an increase of 530 basis points.

However, Gap expects fiscal 2024 net sales to be flat compared with $14.89 billion in 2023. Analysts had expected a 0.48% rise, according to LSEG data.

Gap's forecast signals that improving its product assortments mainly at Athleta and Banana Republic could take longer than expected.

"They can edit and curate better, and can work color and color combinations better," Leslie Ghize, executive vice president of Coller Davis & Co, a division of retail consultancy Doneger Tobe said.

Gap's fourth-quarter net sales rose 1.3% to $4.30 billion, beating estimates of $4.22 billion.

The company reported a profit of 49 cents per share, beating estimates of 23 cents.

(Reporting by Ananya Mariam Rajesh in Bengaluru and Kate Masters in New York; Editing by Shounak Dasgupta)