Khaki king Gap Inc. was among the slew of retailers to report earnings this morning, and the firm managed to narrowly exceed the average estimate of Wall Street analysts. In its third quarter, Gap turned a profit of $238 million, or 30 cents per share, up from its year-ago performance of $189 million, or 23 cents per share. Analysts were expecting a per-share profit of 29 cents. Sales crept higher, rising to $3.854 billion from last year's $3.851 billion. The third-quarter results were boosted by strong sales at Banana Republic North America, as well as lowered marketing costs (and, now that they mention it, I haven't seen any tightly choreographed dance numbers singing the praises of the white t-shirt lately).

Gap added to the positive earnings surprise by raising its fiscal-year earnings forecast to 92 cents to 98 cents per share, a nice jump from its previous guidance of 83 to 88 cents per share.

Despite the better-than-expected earnings, GPS is currently hovering around a 4% loss. The shares gained 2.6% yesterday, though, indicating that investor expectations were running high ahead of the report. The stock's Schaeffer's put/call open interest ratio supports this theory the current reading of 0.45 is lower than 87% of other such readings taken during the past 52 weeks. Unfortunately for those GPS bulls, the shares are now trading below peak call open interest in the December series, which lies at the 20 strike.