Sharply higher profits didn't win Gap Inc. any respect from Wall Street yesterday, as investors disappointed by the retailer's annual earnings projection whacked 6 percent off the price of its shares.

Gap's earnings jumped 26 percent in the third quarter despite flat sales, the company said, because it reined in its inventory and slashed marketing costs. Net income was $238 million, or 30 cents a share, compared with $189 million, or 23 cents a share, in the comparable period last year.

Revenue in the quarter ended Nov. 3 was flat at $3.9 billion. Sales at stores open a year or more, a key industry indicator, fell 5 percent.

Chief Executive Glenn Murphy, sporting one of the "crazy stripe" sweaters that Gap is pushing for the holidays, ticked off the company's accomplishments during a conference call with analysts but also struck a cautious tone.

"We feel we're well-positioned for the holiday season," he said. "We're also very clearly aware that this is going to be a tougher environment than we faced last year."

Gap said full-year profit would be 99 cents to $1.05 a share, up from at most 95 cents, excluding the expenses associated with the closure of the Forth & Towne chain.

The stock closed at $18.96, down $1.24.

The San Francisco parent of nearly 3,200 Gap, Old Navy and Banana Republic stores has been struggling to woo customers who have strayed to competitors.