Gap, Inc. (GPS) Slides on Lower Sales and Stock Downgrade by Multiple Analysts

Shares of San Francisco, CA, based Gap, Inc. (GPS) fell on Tuesday, despite a strong advance in the stock market overall. Gap's stock closed down 11.51%, falling $2.51 per share, to close at $19.30, on volume of 30,922,991 shares. The company reported lower revenues for its fiscal 2016 first quarter, as well as the month of April. The company has also been the subject of a series of stock downgrades from several analysts.

Founded in 1969, Gap, Inc. is a global specialty apparel retail company, offering apparel, accessories, and personal care products for men, women, children, and babies.
It operates in the specialty, outlet, online, and franchise channels. The company operates its business through four segments, including Gap Global, Old Navy Global, Banana Republic Global and Growth, Innovation, and Digital. The Gap Global segment includes apparel and accessories for men and women, Gap Kids, Baby Gap, Gap Maternity, Gap Body, and Gap Fit Collections. The Old Navy Global segment offers on-trend clothing and accessories for adults and children. The Banana Republic Global delivers modern, covetable style for both men and women. The company operates about 3,700 outlets in 90 countries around the world.

On Monday, Gap reported its sales results for the first quarter and for the month of April. For the first quarter, ended April 30, of the fiscal year, Gap reported net sales of $3.44 billion, compared with $3.66 billion in the first quarter of 2015. For the month of April, the company reported net sales of $1.12 billion for the four-week period that ended on April 30. For the four-week period ended May 2, 2015, the company had net sales of $1.21 billion. The company’s comparable sales for the first quarter were down 5% from the same quarter a year earlier, and those sales were down by 4%.

Declines in net sales were distributed across the company’s segments. Gap Global reported negative sales growth of -3% for the first quarter, which follows a 10% decline for the first quarter 2015. Banana Republic Global was down 11%, compared to a decline of 8% last year. And Old Navy Global reported a 6% decline in the first quarter, compared to a 3% gain for the same quarter in 2015.

The official release of the company’s first quarter fiscal 2016 earnings will take place on May 19. At present, the company expects first-quarter earnings to come in at $0.31 or $0.32 per share.

Several analysts have reduced their rating or their target price on Gap's stock. Jefferies confirms its "buy" rating, but lowered the target price of $34 down to $28. Deutsche Bank lowered its target price from $21 to $17, and maintained its "sell" rating. Meanwhile, RBC Capital lowered its price target from $26 down to $20.

The trading volume of nearly 31 million shares was almost five times higher than Gap's average daily volume over the past three months.

“Our industry is evolving and we must transform at a faster pace, while focusing our energy on what matters most to our customers,” reported Gap chief executive officer, Art Peck. “We are committed to better positioning the business to recapture market share in North America and to capitalizing on strategic international regions where there is a strong runway for growth.”

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Published on May 11, 2016
By Kevin Mercadante

Copyrighted 2016. Content published with author's permission.

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