International clothing retailer Gap has sounded a confident note on its 2005 prospects after a strong finish to its financial year despite continued tough same-store sales comparisons.

Gap's fourth-quarter earnings were $370m, up from $356m a year ago and ahead of Wall Street forecasts. A focus on cost savings, a low shrinkage rate, and strong sales in the group's Banana Republic chain all helped counter a tough sales environment for the Gap and Old Navy chains in the US, and the Gap International business. Group sales for the quarter were flat at $4.9bn, with group same store sales down 3 per cent.

Across the year to January 29, group sales of $16.3bn were up 3 per cent. Group same store sales were flat, with Gap International same store sales down by 8 per cent across the year. The year saw Gap exit the tough German market, selling its stores to H&M.

Gap president and CEO Paul Pressler said: "In 2004, we delivered solid earnings performance, while mining growth opportunities within our brands, significantly strengthening our balance sheet, retiring debt and completing a $1bn share repurchase program.

"Having stabilized our operations and well positioned our brands in the marketplace, we have a strong foundation for 2005. Going forward we will focus on driving growth opportunities across our brand portfolio, strengthening operating performance and enhancing shareholder value through cash distributions."

Gap said it expects earning per share to be between $1.41 and $1.45 a share in the 2005 financial, above Wall Street estimates of $1.40 a share. During the year, the company expects to open about 175 stores, weighted towards the Old Navy chain, and close about 135 stores, weighted toward Gap. In November, the group confirmed plans to open three Banana Republic stores in Japan this year, the first time it has taken a non-Gap brand outside North America.