Gap (GPS) Stock Off on October Sales, Announces New CEO

Shares of The Gap Inc. (GPS) were trading down -4.15 or -9.9% to $37.75 per share in premarket trading this morning after the company announced September sales had risen just one percent from the same period one year ago. Also, the Gap named Art Peck to the position of Chief Executive Officer succeeding current CEO, Glenn Murphy. The Gap Inc. stock closed at $41.90 per share, up +0.70 or +1.7 percent in Wednesday's regular trading session.

San Francisco, California based, The Gap Inc. is the world's second largest retailer of clothing and accessories.
Founded in 1969, the company operates under five different divisions: The Gap, Banana Republic, Piperlime and Old Navy. The company operates more than 3,200 stores worldwide and reported net income for the 52 weeks ended on February 1st, 2014 of +1.28 billion, or $2.74 per diluted share.

The Gap reported September sales of $1.48 billion for the five weeks ended on October 5th, which compares to sales of $1.46 billion in the same period last year. Glenn Murphy, the current CEO said that "September proved to be more challenging than we expected . He continued, "While Old Navy and Banana Republic are performing well, we are working aggressively to ensure our entire portfolio of brands delivers to its potential.

The Gap's comparable sales for the month were flat compared to a decrease of three percent last year. Comparable sales for the company's global brands had Gap Global, showing -3 percent versus -3 percent last year, Old Navy Global, +1 percent versus -2 percent last year and Banana Republic Global, +2 percent versus -5 percent last year.

The company said that margins for the third quarter would be lower than last year's due to underperformance of the Gap brand. In addition, operating expenses were forecast to rise eight percent in this year's third quarter versus last year's.

In addition to the September sales news, The Gap Inc. announced its board had named Art Peck, president of the company's Growth, Innovation and Digital division to succeed retiring Chief Executive Glenn Murphy as the new CEO and Bob Fisher as the new Chairman of the Board. Both men have worked closely at Gap for the better part of a decade. The change will go into effect on February 1st, 2015.

After seven years in the position of CEO, Murphy had made his personal decision to retire at the end of the fiscal year, allowing for a smooth transition of the Gap's leadership. In the company's press release, Murphy said that, "Today, Gap Inc. is a formidable global fashion retailer with a strong foundation in place for long-term growth, therefore making this an appropriate inflection point for me to pass the baton to a leader who will take our portfolio of brands to even greater heights . He concluded, "With consumer expectations rapidly evolving, Art is the right leader at the right time to build on our success and ensure a compelling experience for our customers across both our physical and digital channels.

The decline in sales and the departure of its CEO are clearly affecting Gap stock in Thursday's premarket, nevertheless, as the stock approaches its yearly low, it is still trading at 15 times earnings of $2.73 per share.

Other News About Gap
Gap Launches Bold New Films, Directed By David Fincher, As Part Of Its Global 'Dress Normal' Campaign
Gap will produce four commercials by the director of "Fight Club .
Gap Inc's Social Media: Selling Feminism And Equality, Not T-Shirts
Company has taken an activist role in social equality and feminism.

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Published on Oct 9, 2014
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2020. Content published with author's permission.

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