Gap's 1Q Net Income Falls 23 Percent As Costs Soar

SAN FRANCISCO (CBS/AP) - Gap Inc. is reporting that rising costs, especially for its lower-priced items, helped push down its first-quarter earnings 23 percent as its revenue fell only slightly.

The company, which operates the Banana Republic and Old Navy brands as well as Gap, said Thursday that its expenses are rising faster than it anticipated, and it's now spending about 20 percent more to produce each item than it did a year ago.

Recent retail price increases have not kept pace, and the company dramatically lowered its full-year earnings forecast.

Gap said its net income was $233 million, or 40 cents per share, for the quarter that ended April 30. That compares with $302 million a year earlier, but it's slightly higher than analysts expected.

Its revenue fell 1 percent to $3.29 billion.

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