Gap Inc (NYSE:GPS) stock rose 3.52% (As on March 8, 12:35:33 AM UTC-4, Source: Google Finance) after the company’s largest banner Old Navy returned to growth for the first time in more than a year during its holiday quarter as the retailer delivered earnings that came in well ahead of Wall Street’s expectations. Sales at Old Navy grew 6% to $2.29 billion, and Gap’s overall gross margin surged 5.3 percentage points to 38.9% thanks to fewer markdowns and lower input costs. Analysts had expected a gross margin of 36%, according to StreetAccount. The company’s reported net income for the three-month period that ended February 3 was $185 million, compared with a loss of $273 million, a year earlier. Comparable sales during the quarter were flat, compared to estimates of down 1.1%, according to StreetAccount. In-store sales were up 4% while online sales decreased 2% and represented 40% of total revenue.

Moreover, the retailer decreased inventory by 16% during fiscal year 2023, and with those levels now in check, Gap is working to hold the line on promotions and drive full price selling. During the quarter, Gap saw higher average selling prices across all of its brands, and it expects to grow its gross margin by at least a half percentage point in fiscal 2024.

GPS in the fourth quarter of FY 23 has reported the adjusted earnings per share of 49 cents, beating the analysts’ estimates for the adjusted earnings per share of 23 cents, based on a survey of analysts by LSEG, formerly known as Refinitiv. The company had reported the adjusted revenue growth of 1 percent to $4.3 billion in the fourth quarter of FY 23, beating the analysts’ estimates for revenue of $4.22 billion. Like other retailers, Gap benefited from a 53rd week during fiscal 2023 and without it, sales would’ve been down during the quarter. The extra week contributed about four percentage points of growth during the fiscal fourth quarter. Further, Gap has made improvements in growing its gross margin and streamlining its cost structure, but it’s been grappling with a steep decline in sales across its four brands: its eponymous banner, Old Navy, Athleta and Banana Republic.

In the current quarter, it expects sales to be roughly flat, compared to estimates of down 0.2%, according to LSEG. For the full year, it expects sales to also be roughly flat, on a 52-week basis, compared to estimates of up 0.5%, according to LSEG.