SAN FRANCISCO - Cost cuts helped Gap Inc beat quarterly profit expectations by a nose on Thursday, as the apparel retailer reported a long-awaited sales improvement at its lower-cost Old Navy chain.

Better-than-expected results from youth-oriented chains Aeropostale Inc and Pacific Sunwear of California Inc also gave a lift to the apparel retail sector.

Net profit in Gap's first quarter fell nearly 14 per cent to US$215 million (S$311 million), from US$249 million, a year earlier.

Analysts, on average, had been expecting earnings of 30 cents per share, according to Reuters Estimates.

Earlier this month, the operator of the Gap, Old Navy and Banana Republic chains raised its earnings forecast to a range of 29 cents to 30 cents. Revenue fell 7 per cent to US$3.13 billion and operating expenses fell US$73 million in the quarter, the San Francisco- based company said.

Gap, which has been cutting costs throughout its organisation, has also benefited from new improvements in merchandise and marketing at its long-struggling Old Navy chain, where same-store sales fell 3 per cent in the quarter compared with 18 per cent a year earlier.

But those gains have been offset by recent weakness in Banana Republic, whose higher prices have turned off consumers focused on bargains in the downturn.

Inventory was down 12 per cent at the end of the quarter, Gap said. Apparel retailers have lowered inventory levels in the consumer spending slump so they are not burdened later with too many markdowns, which undermine profit margins.

Aeropostale, whose promotions have made the retailer a hit with teens in the recession, reported a soaring 81 per cent rise in quarterly net profit on a 21 per cent rise in sales.

Surf-inspired retailer Pacific Sunwear reported a net loss of US$8.7 million, from a year-ago loss of US$12 million.