Gap Inc.

Gap offers muted outlook for annual earnings, lower profit

Gap Inc. offered a downbeat outlook for its annual profit on Thursday after reporting a 43 percent drop in net income for the second quarter, weighed down by moves to close stores.

The San Francisco, California-based company, which operates stores mainly under its namesake brand as well as Banana Republic and Old Navy, is facing the same problems as other fashion retailers as shoppers buy less clothing in general and shop more at off-price chains when they do. That has resulted in sluggish traffic at the stores. But it's also long been struggling with its own problems, mired in a sales slump as its clothes don't stand out in an overcrowded landscape.

Gap has been in a...