Struggling clothes retailer Gap has reported a decline in profits and sluggish sales.

Gap said on Thursday that profits after tax for the three months to early August came in at $57m (�37m), slightly ahead of its own forecasts, but 37% down on the same period last year.

The company, which owns the US-based Old Navy and Banana Republic stores as well as the Gap chain, chalked up total sales of $3.3bn, up slightly from $3.2bn one year earlier.

But same-store-sales - revenues at stores that have been open for at least a year, a common industry measure of sales performance - were down by 7%.

Promotional drive

Gap chief executive Millard Drexler said the company remained under pressure because of 'negative traffic trends,' but stressed that new product ranges should restore its fortunes in the months ahead.

"The foundation is in place for ongoing improvement at each of our brands," he said in a statement.

"Our merchandise now reflects the quality and style our customers expect from us."

The company is planning a round of 'aggressive' promotional and marketing events in the second half of August in an attempt to drive up sales, the company's chief financial officer Heidi Kunz said.

Out of fashion?

Gap was one of the clothes retail sector's most dazzling success stories of the 1990s, kitting out a whole generation of American and European teenagers in classic cotton casuals.

But the company failed to keep pace as consumer tastes switched to upmarket designs, and was hit hard by competition from discount retailers such as Matalan in the UK.

Its monthly same-store-sales have fallen for more than two years.

Gap shares - which have lost about 48% of their value in the past year - closed 54 cents higher at $13 in New York on Thursday in a market that was slightly higher overall.