Gap Inc., which owns clothing retailers Banana Republic and Old Navy as well as its namesake brand, expanded into the thriving luxury market with its purchase of women's apparel retailer Intermix Holdco Inc. for $130 million.
Gap, which reported a better-than-expected 5 percent rise in same-store sales for December, also approved a $1 billion share repurchase program after an earlier $1 billion program ended in the fourth quarter.
Analysts had expected Gap to report a 3.5 percent rise in same-store sales, according to Thomson Reuters data.
Gap shares were up 5 percent at $33 in premarket trading.
Privately held Intermix sells clothes and accessories from renowned design houses such as Yigal Azrouel, Yves Saint Laurent, Brian Atwood and Jimmy Choo. It has 32 boutique stores in North America and also operates a retail website.
Gap has been attempting to turn around its business after losing ground to rivals including Inditex SA's Zara chain, which has a reputation for trendier clothes.
The company has also undertaken a major change in its management lineup, which helped to turn around sales.
News of the acquisition was first reported by the Wall Street Journal.
The deal marks the latest by Gap following its 2008 purchase of women's active apparel retailer Athleta.
Gap said Intermix would continue to operate under the leadership of its co-founder Khajak Keledjian in the role of chief creative officer.
Gap shares closed at $31.37 on the New York Stock Exchange on Wednesday.
© 2015 Thomson/Reuters. All rights reserved.