For almost a decade now, Gap has struggled with its fashion mix, losing out to rivals like Inditex, which overtook Gap as the world's biggest clothing retailer by sales in 2010.
The owner of the Gap, Old Navy and Banana Republic chains, expects to earn $1.75 to $1.80 a share in fiscal 2012, while analysts, on average, were expecting $1.79 a share, according to Thomson Reuters I/B/E/S.
Gap had preannounced that sales fell 2 percent to $4.28 billion, while comparable store sales were down 4 percent.
For the quarter ended January 28, the company, which competes with Uniqlo parent Fast Retailing Co <9983.T>, H&M owner Hennes & Mauritz AB
Net profit fell 40 percent.
In spite of 2011 earnings being below last year, we're pleased with the progress we made against our long-term strategic plan, including growing our online business and expanding internationally, said Chief Executive Glenn Murphy.
Gap shares were trading down at $23.35 Thursday in late trade. They closed at $23.52 on the New York Stock Exchange.
(Nivedita Bhattacharjee in Chicago; Editing by Bernard Orr)