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Foreign exchange dents Gap profit forecast for new fiscal year

The sign outside a Gap store is seen in Broomfield, Colorado February 27, 2014. REUTERS/Rick Wilking
The sign outside a Gap store is seen in Broomfield, Colorado February 27, 2014. REUTERS/Rick Wilking

(Reuters) - Gap Inc on Thursday reported a higher-than-expected holiday quarter profit, helped by January sales gains, but the fashion company said it expected unfavorable currency exchange rates will hit its full-year profit.

Gap, which also operates the Old Navy and Banana Republic chains in addition to its eponymous stores, expects a profit of $2.90 to $2.95 per share this fiscal year, below analyst forecasts for $3.02, according to Thomson Reuters I/B/E/S.

The company said weaker foreign currencies would cut about 5 percentage points from its earnings per share growth rate.

For the fourth quarter, which included the key holiday season, Gap reported a profit of $307 million, or 68 cents per share, two cents better than expected. In the same quarter last year, Gap's profit was $351 million, or 73 cents.

Analysts, on average, had expected a quarterly profit of 66 cents per share.

Gap was one of few retailers to report a rise in comparable sales in January, when cold weather and low confidence led U.S. consumers to curb spending. As previously reported, Gap's comparable sales, consisting of e-commerce and sales at stores open at least a year, rose 1 percent last month.

Gap also said it was opening its first five Old Navy stores in China this fiscal year.

(Reporting by Phil Wahba in New York; Editing by Nick Zieminski)

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