Gap shares surge as it raises guidance, touts 'strong start' to holiday

Hurricanes and unseasonably warm weather hit sales at Gap during its fiscal third quarter, but the apparel company still posted better-than-expected results, leading it to raise its annual guidance for a third time this year. 

Gap, which runs Old Navy, Banana Republic, Athleta and its namesake banner, is now expecting fiscal 2024 sales to be up between 1.5% and 2%, compared with previous guidance of "up slightly." That's ahead of the 0.4% growth that LSEG analysts had expected, and bodes well for the all-important holiday shopping season, which is now underway. 

The company is also anticipating gross margins and operating income will grow more than it previously expected.

Shares surged about 13% in extended trading.

Here's how the nation's largest specialty apparel retailer performed compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

Gap's reported net income for the three-month period that ended Nov. 2 was $274 million, or 72 cents per share, compared with $218 million, or 58 cents per share, a year earlier. 

Sales rose to $3.83 billion, up about 2% from $3.78 billion a year earlier.

Across Gap's business, unseasonably warm weather affected sales by about 1 percentage point during the quarter, while storms and hurricanes led overall store sales to fall by 2%, CEO Richard Dickson told CNBC in an interview. 

"We had unusual circumstances, hurricanes, storms that led to almost 180 closures at the peak of the impact," said Dickson, adding the storms affected Old Navy, Gap's largest brand by revenue, the most. 

As soon as the weather turned around, sales "rebounded" and the holiday shopping season is off to a "strong start" so far, said Dickson. 

"We are energized about the holiday. Our teams are