The operator of Gap, Banana Republic and Old Navy apparel stores also raised its fiscal 2010 dividend 18 percent to 40 cents and authorized an extra $1 billion in share repurchases. Shares in the company rose 1.2 percent after-hours.
After a years-long sales slump, Gap has turned around its sales through better merchandising, more targeted fashion and marketing, while beefing up its profit margins. It recently logged a 5 percent increase in January same-store sales, with gains in all its store chains.
Net income in Gap's fourth quarter ended January 30 rose to $352 million or 51 cents per share from $243 million, or 34 cents per share, a year earlier.
Analysts on average had been expecting earnings of 50 cents per share, according to Thomson Reuters I/B/E/S.
Revenue rose 4 percent to $4.24 billion -- just above the $4.23 billion expected by Wall Street -- on a same-store sales gain of 2 percent. A year earlier, same-store sales fell 14 percent.
Gap's operating margin in the quarter was 13.9 percent compared with 9.8 percent in the year-ago period. Gap called that its highest fourth-quarter margin in more than a decade.
Looking ahead, the company said it expects fiscal 2010 earnings per share to range between $1.70 and $1.75, above the $1.69 expected by Wall Street.
It sees operating margins growing about 13 percent for the year.
The seller of American looks like khaki trousers, jeans and T-shirts said it would open a Gap store in Milan in late 2010 and open a Banana Republic store, its more upscale brand, next door. Additional stores in Rome and other Italian cities are set to open in 2011.
The company already operates in London, Paris, Tokyo and in Ireland and Canada, and has franchise agreements for Asia, the Middle East, Latin America and other parts of Europe.
Gap sees capital expenditures of about $575 million in the fiscal year, from $334 million in 2009, driven by Old Navy remodels, store openings abroad and an international launch of its website.
The company's shares rose 1.2 percent to $20.65 after closing at $20.39, up less than 1 percent.
(Reporting by Alexandria Sage; editing by Andre Grenon and Matthew Lewis)