The Gap Inc. (GPS) Stock Up on Positive Earnings, Lower Forecast

Shares of The Gap Inc. (GPS) were trading up +1.23 or +3.05 percent to $41.60 per share in this morning's premarket. Shares gained this morning and in yesterday's afterhours trading after the company announced its earnings for its 2014 fourth quarter, which beat analyst estimates. Nevertheless, the company's full year 2015 guidance was below analyst expectations. The Gap Inc. stock closed at $40.37, up +0.08 or +0.20 percent in Thursday'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 3,000 stores worldwide with over 2,500 of them located in the United States and employs about 130,000 people. The Gap Inc. owns stores in the U.S., Canada, the UK, Japan, Brazil, France, Italy, Ireland and Puerto Rico, with stores in other countries owned by franchises.

For the company's fourth quarter ended on January 31st, 2015, the Gap's reported net earnings of $319 million or $0.75 per share, an increase of +4 percent over the same period last year. Revenue increased by +3 percent to $4.71 billion with same store sales increasing +2 percent versus an increase of +1 percent in the same period one year ago. The analyst consensus for earnings was +$0.74 on revenue of $4.7 billion.

The company's guidance for its fiscal 2015 year was for earnings per share of $2.75 to $2.80 and an increase in capital spending to $800 million compared to $714 million in 2014. Analysts were expecting the company's guidance to be $3.01 for the full year. The Gap cited unfavorable currency translation due to the strong dollar, and the labor dispute on U.S. west coast ports as the primary reason for the lower than expected full year guidance.

Sabrina Simmons, the company's Chief Financial Officer and Executive Vice President said in the company's conference call after the earnings release that, "Regarding earnings per share, on a reported basis, we expect earnings per share to be in the range of $2.75 to $2.80. Included in this guidance is an estimated unfavorable impact from foreign exchange at current spot rates of about $0.16, an unfavorable impact of about 13 pennies, due to the West Coast port situation, and an expectation for a slower turnaround at Gap Brands."

In addition to the earnings release, The Gap also announced it would increase its yearly dividend to $0.92 per share this year, up from the current $0.88, with its first dividend of the year of $0.23 per share payable to all shareholders of record on April 8th and payable on or after April 29th. The company also announced it will set aside an additional $1 billion to buy back its own shares after approving $500 million to purchase shares last October.

In related news, the company announced Thursday it was rehiring Wendi Goldman as Executive Vice President for Gap product design. Ms. Goldman was formerly co- president of Limited Brands and at one time worked for Banana Republic. The Gap Inc. stock is down a fraction for the year but appears to be on an upswing after yesterday's earnings release. After last week's settlement of the West Coast labor dispute, the company could see a better than expected first quarter.

Other News About GPS
Gap Rehires Veteran to Revive Namesake Stores
The Gap rehires Wendi Goldman for its product design department.

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Published on Feb 27, 2015
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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