Fashion giant Gap has reported a surge in second quarter profits despite a fall in sales.

The retailer has also confirmed Tom Wyatt as permanent president of its Old Navy division, where another senior appointment is also planned.

Stringent cost control and focus on margins helped the store group lift second quarter net earnings from US$152 million (£81.5 million) last year to US$229 million (£122.8 million). The increase came in spite of a slip in sales from US$3.69 billion (£1.98 billion) to US$3.5 billion (£1.88 billion) and a 10 per cent like-for-like store sales decline versus a 5 per cent fall last year.

Gap chairman and chief executive Glenn Murphy said: “External conditions aside, we continue to deliver improved earnings with healthy margins. While we continue to pursue our 2008 financial strategy, we are very focused on bringing more customers into our stores.”

Comparable sales fell 6 per cent at Gap’s eponymous North American and European divisions and by the same amount at Banana Republic. Old Navy was down 16 per cent.

Murphy was optimistic that Wyatt’s appointment, having held the role on an interim basis since February, would make a difference.

He said: “Old Navy retains a strong place in the hearts and minds of customers and I’m confident that, with Tom as president, more shoppers will rediscover the fun and value that’s unique to this brand.”

Gap will appoint an executive to develop strategy for Old Navy alongside Wyatt. Murphy said: “Tom and I are actively looking for a powerhouse merchant who can be the creative force behind our product strategy as we build upon the positive steps our teams have taken.”

Old Navy merchandising executive vice-president Sheryl Clark has left.